The Pandemic Saw the Likes of Starling Bank, Swiftaid and Finexos Innovate to Aid the Community
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The Pandemic Saw the Likes of Starling Bank, Swiftaid and Finexos Innovate to Aid the Community

The pandemic has been disastrous for so many, ranging from people being put out of jobs to people not being able to see and help loved ones. However, there is always some positive that can be found in situations like this, some sort of consolation for all the misery we have suffered. In this case, it’s the digital innovation that acts as a saving grace, the light to look to. Fintech acceleration and uptake has skyrocketed as a result of the pandemic, meaning technology is being applied in areas that need it the most. 

Discussing the pandemic’s short and long term effects on Fintechs and how they are doing good for the community is Lord Chris Holmes. He is a member of the House of Lords Select Committee on Science and Technology and has co-authored Lords Select Committee reports on: Digital Skills, Social Mobility, Financial Inclusion, AI, Intergenerational Fairness and Democracy and Digital Technologies. An ex-Paralympic swimmer, Holmes won nine gold, five silvers and one bronze Olympic medal across four Games, including a record haul of six golds at Barcelona 1992.

Lord Chris Holmes, member of the House of Lords Select Committee on Science and Technology
Lord Chris Holmes, member of the House of Lords Select Committee on Science and Technology

Covid has turned our world upside down. It has been devastating for so many in so many ways, but it has also accelerated innovation and technological adoption amongst groups traditionally reluctant about moving particular parts of their lives, such as banking, online. I recently conducted a series of interviews with several high-profile figures from the world of fintech, across industry and government, and one of the areas of consensus was the degree to which the Covid pandemic had accelerated existing trends towards fintech development and uptake. In answer to a question about whether 2020 had been a good year for fintech the answers ranged from game changing to phenomenal. It is horrendous that the pandemic has caused so much suffering, and created significant challenges in many sectors, but fintech has been able to play a positive role.

As well as accelerating adoption in terms of online banking and contactless payments the pandemic has created problems that many in the fintech sector have responded to with innovative solutions. One huge problem, of course, was the significant numbers of people, suddenly forced to isolate at home, dependent on others to do their shopping and pay bills. Starling Bank CEO Anne Boden said that they listened to customers’ needs and quickly responded by creating the Connected card.  The card acts as a second debit card, it is connected to your account and you choose how much money to put on it– anything from £1-£200 – it can then be given to a volunteer or friend to use for contactless payments in-store. Along with this kind of responsive product innovation Starling Bank has also been lending to SMES via the Government Covid loan schemes and has just won the Best British Bank award for the fourth year in a row. A pretty impressive record.

One initiative that predates the pandemic but has become increasingly important as contactless becomes the preferred payment method is the automation of Gift Aid on contactless and other donations. Gift Aid is the income tax relief designed to benefit charities by allowing them to claim the basic rate of tax on any donations made by UK taxpayers.  Charities miss out on £564million of unclaimed Gift Aid every year. Swiftaid have been working with HMRC on exploring linking to an individual’s tax account, ideally a check about whether someone is a taxpayer could be done before the declaration is created. It could also streamline reporting for higher rate taxpayers so they could receive tax benefits automatically. This year they are integrating with JustGiving and are also looking at retail Gift Aid (Charity shops), Text Giving, charitable roundup on purchases, visitor attractions and the potential £2.25billion from the last four years of outstanding, retrospective Gift Aid that could be captured. The most pressing challenge they face is waiting for payment processors and merchant acquirers to add a simple piece of data- the PAR- (as required by Visa) to card payment messaging. I do call on any payment processors and merchant acquirers out there to act on this as a matter of urgency.

Another incredibly positive initiative I was pleased to be involved with last year was the CPRAS Fairer Finance Hackathon. A competition launched to find a fintech solution that would help people who are financially vulnerable or at risk of getting caught in the high cost, self-perpetuating poverty trap. Recent statistics have shown that 23% of the UK population is in poverty. 14.9 million consumers are behind on their bills and 5.7 million are in receipt of universal credit. The latest financial lives survey from the FCA on the impact of covid-19 found that 27.7 million people have characteristics of financial vulnerability – an increase of 3.7 million since February 2020. The fairer finance challenge was to combine three readily available technologies into a single web application that incorporates an “open banking” service, a marketplace platform and a digital wallet that handles the user’s regular payments. The winners, Finexos, created a ‘financial intelligent online assistant’ FIOA. The platform provides an initial financial health check and suggestions for support through the app. Regular use of the app will provide the data that allows a full assessment for the amount of credit required, conduct suitability, affordability and repayment capability checks and then designs a consumer specific debt exit programme that will run over a number of years to reduce the cost of borrowing and increase monthly cash flow.

This is what has always excited me about fintech; the opportunity to address, innovatively and sustainably, real problems that have dogged our society for decades.  It is shocking that so many in our society are excluded from financial services, not just the unbanked, but those who pay what’s known as the poverty premium, the higher costs that are incurred if you have a poor credit rating, or have to pay high prices for utilities or credit.  It can’t be allowed to continue that, all too often, those who have the least end up having to pay the most. The technology now available to us has the potential to reduce the risks and reduce the costs of traditional financial services and therefore, increasingly, enable, include, and empower those previously excluded.

In his opening keynote at Fintech Week London, Chris Skinner talked about this being a period in which we move from shareholder capitalism – in which the focus is purely on maximising shareholder profits – to stakeholder capitalism which he described as doing “whatever you have to do to make a profit whilst doing good for society, good for the planet.” I hope he is right and am delighted to play my part by continuing to champion fintech for good.

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