Coronavirus has triggered significant economic damage in the United Kingdom. As many as one-third of workers in the private sector are either furloughed or unemployed. As a result, up to three-quarters of household income has plummeted. There is a government system to curb unemployment, but its implementation has been slow so far.
Startups and self-employed workers face an increasingly daunting future. Several companies are now in the ‘survival stage,’ maybe with the aid of funds collected earlier or funding from a government program.
If you understand blockchain tech and have ever been interested in crypto trading, you’ve undoubtedly heard of Fintech – the technology that may very well be a saving grace for UK business owners in these turbulent times.
Fintech is a mix of finance and tech. It applies to practically any company that uses it to enhance or simplify its financial processes or services. This is a rapidly growing and broad-based market, servicing not only consumers but also companies.
In the past, the UK Government has strongly encouraged companies to innovate in this field. A ‘sandbox’ has even been set up to allow businesses to test their innovations, and a legal framework has been developed to support peer-to-peer lending and crowdfunding.
What is Fintech Doing for UK SMEs?
The ‘Covid Credit’ network in the UK has originated from Fintech, helping companies rebound from the crippling financial impact of the coronavirus in various ways.
The online platform allows self-employed individuals to validate their past profits with banking info. This depends on the government’s knowledge, which shows to the Fintech lender that a loan can be given at a reasonable cost.
This program may be a great way for the existing policy funding given. It is built on out-of-date tax statistics, which have been accused of being slow in a crucial moment for company owners.
Indeed, traditional lenders have been flooded by applications, and Fintech may offer a way to help ‘dole out’ government funding loans.
Why is it Better Than the Current Government Schemes?
There is already a range of government programs providing financial assistance through the coronavirus.
The largest one is a tank of 330 billion pounds. The government pays out to offset as much of the costs of company losses as possible, giving varying sums of funding to various businesses. The other is the furlough plan, which provides the reimbursement of up to 80 percent of workers’ salary to the overall amount of £2500. It refers only to those workers who are unable to work due to the company’s closing in the near future.
Although this would appear to be good on face value, there are certain downsides.
The government does not just give wages in the first place. Employers need to pay their workers normally and then get the money back from the government later.
There have also been frequent critiques of lending speed due to the small number of processing workers currently at two. Nonetheless, this is being raised to 25 to satisfy demand better. This may explain why just 1% of the British Chamber of Commerce members have been given a government-backed loan.
Even though Fintech is a potential alternative to the problem, the government has maintained that Fintech is not capable or deserving of being included in their schemes.
However, Innovative Finance, a leading Fintech firm in the UK, has already secured thirty financial suppliers and helped companies ineligible for CBIL (Coronavirus Business Interruption Loan Scheme).
Although Banks Struggle with Demand, Fintech Is Ready and Waiting
Some schemes currently in place by the government will help ease the financial pressure arising from the closings due to the coronavirus.
Such schemes as CBIL have been criticized for being too sluggish. They lack an adequate number of support workers and have too many applications to handle. Moreover, provided that these programs only use traditional loans, certain businesses may not even be eligible.
Fintech, which validates someone’s income using their banking records, is a feasible alternative. This detail is then forwarded to the applicant to show that they are suitable for a loan. Since Fintech is not only using traditional lenders, the odds of obtaining a loan are higher.
The UK Government has been hesitant to use this platform so far. Nevertheless, Fintech will sit on the sidelines until its full potential has been recognized.