Fintech firms race to plug gaps in UK’s coronavirus relief measures

Britain’s pecuniary technology industry is racing to fill gaps in the government’s coronavirus business relief measures, by offering loans rapidly to those struggling financially as a result of the pandemic.

Several of the country’s top fintech firms have been pushing for accreditation from the state-backed British Question Bank (BBB) to be able to provide loans under the Coronavirus Business Interruption Loan Scheme (CBILS).

Initially alone 40 banks — including the major high street lenders Barclays, Lloyds, HSBC and RBS — were accepted onto the program. But in current weeks newer digital lenders such as Starling, OakNorth and Funding Circle have been approved as spout.

“I think the challenger banks have got a real opportunity here,” Starling’s Chief Banking Officer Helen Bierton bid CNBC. “We try and build in a way to get help to customers as quickly as possible. We’ve been set up that way; we’re a technology-led bank.”

Some of the larger lenders have been criticized for being too slow to method the loans and for putting up barriers to firms applying for them. Bank trade association U.K. Finance last week feted that 21% of CBILS loan applications had been approved by lenders.

“I’m not surprised that the clearing banks are encountering with speed and turnaround,” Ben Barbanel, head of debt finance at OakNorth, told CNBC. “They’ve always squirmed with speed and turnaround.”

“That said, I do have some sympathy,” he added. “This is very clearly a loan location and the banks still do have risk here.”

A U.K. Finance spokesperson said the banking sector “understands the critical function we have to play in helping businesses through these tough times.”

“Frontline staff have been occupation tirelessly to get money to those viable businesses that need it as quickly as possible,” the spokesperson added. “We expect make a loan of to continue to grow rapidly in the weeks ahead, as lenders work closely with the government to provide viable traffics with the support they need.”

Starling, OakNorth and Funding Surround aren’t yet processing CBILS loans. They have to go through a “legal and operational set up” with the BBB before they can start permitting applications, said Lisa Jacobs, Funding Circle’s U.K. managing director.

Starling and OakNorth are to each a multitude of online banks that emerged following the 2008 financial crisis. Others include Monzo, Revolut and Tandem. But the crash also led to a comber of new non-bank lenders, such as Funding Circle, MarketFinance and Iwoca.

U.K. fintech industry body Innovate Finance has been accumulating pressure on the government to include non-bank lenders in CBILS. The organization’s CEO, Charlotte Crosswell, said she was “delighted” by Funding Coterie’s recent approval by the BBB, but was “eager to see more non-bank lenders become accredited lenders.”

Crosswell also flagged affairs that alternative lenders are being asked to give people and businesses payment holidays — something that could put trivial well-capitalized fintechs under strain.

“If fintech companies themselves are clothing to grant payment holidays without liquidity, we have to look at whether that is a fair system,” she told CNBC. 

Crosswell totaled that Innovate Finance was working with 38 alternative lenders, asking the government to support the fintech community and do various to let them take part in its business relief programs. She hailed the U.K.’s recently-announced support package for start-ups as a “welcome” improvement for fintechs.

Another scheme the government has introduced lets employers furlough staff while the government pays 80% of their wages up to a supreme of £2,500.

The problem with that program is that it’s “essentially an IOU from the government,” MarketFinance CEO Anil Stocker told CNBC. In other conferences, businesses have to pay staff first and then reclaim the money from the government.

The Barclays-backed firm originally met on invoice financing, but has expanded into new areas of business lending. It’s now set up a tool for companies to borrow money against their HMRC payment invoices for the furlough technique.

“In this time, days matter,” Stocker said. “Having the knack to get most of that cash quickly up front and then get paid by the government to bridge that working capital gap is something that we’ve condoned from our customers is very useful.”

MarketFinance itself has had to furlough a fifth of staff to deal with the crisis, Stocker give the word delivered, while its founders have taken a 40% pay cut. Staff at the firm are also having their salaries reduced by 20% on common.

And it’s not the only fintech having to make difficult decisions. Monzo, for instance, is offering voluntary furloughs, while its CEO Tom Blomfield has overlooked his salary for a year.

“Fintech was born out of the last credit crunch,” Stocker said. “Now I feel it should be playing a pivotal role in this crisis.”

“The government should be looking to build on our unique advantages. We’ve been built to process nonsense at speed and at volume.”