How a fintech born from the 2008 recession is navigating the pandemic

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Bill Clerico created a new company during the last financial crisis, and sees a similar opportunity now. The coronavirus pandemic is affecting different markets in vastly different ways, and easing the flow of capital is just one way to provide help.

“It’s not fair. You have a small to medium-sized business and a large business in the same industry, and the small business is getting hit harder than the big guy. One business is up and another is down,” said Clerico, CEO and founder of WePay. “There's a lot of stories of hardships and it’s not evenly distributed. You have travel agencies, folks at restaurants that are getting hit far harder than other types of businesses.”

Small businesses have been particularly hard hit during the coronavirus outbreak, losing customers because of shutdowns and economic stress and struggling to access funds and technology to drive their recovery.

“Given the nature of the pandemic, it’s pretty heartbreaking,” Clerico said.

These businesses often do not have the technology in place to quickly shift to digital to accommodate the loss of foot traffic. WePay is among the group of technology companies — including Stripe, PayPal, Square and Kabbage — that are stitching access to capital with remote tools like APIs to allow businesses to continue to operate under rapidly changing circumstances.

WePay was acquired by JPMorgan Chase in 2017, allowing the Bay Area fintech to access the bank’s more than 4 million small-business clients. WePay's ability to connect businesses, banking and payment processing gave JPMorgan Chase the API tools to compete with Stripe and PayPal.

Bill Clerico
Bill Clerico, founder and CEO of WePay, a unit of JPMorgan Chase

These fintechs are pairing lending and merchant services with integrated payments, which was an existing trend for the small-business market before the pandemic hit. It’s become a means of survival now.

“Significantly more consumers are buying and paying online now than they were in January. All forms of digital commerce are increasing significantly as much more of the population is interacting, and shopping, remotely in response to lockdowns across the globe,” said Dayna Ford, senior research director at Gartner.

WePay was founded in 2008, and has built a market of small businesses and micromerchants that have traditionally been underserved by the mainstream banking industry. Not all challenger banks, fintechs or alternative payment and lending companies were formed in direct response to the 2008 crisis, but leaned into the cultural change brought about by that event as older banking methods gave way to a more digital approach driven by new sources of data.

The cloud and innovative data became a new path to bring financial services to small businesses, a model that’s getting put to the test during the current turmoil for both these fintechs and their business clients.

“As an entrepreneur myself during the 2008 financial crisis, who suffered from the closure of capital markets, I can appreciate that it takes funds when the capital markets shut off,” Clerico said.

As part of its coronavirus response, WePay has accelerated deposit availability. Through same-day deposits, businesses that work with WePay and Chase can use funds immediately without fees. “A restaurant that does sales Friday and Saturday doesn’t always get paid for that business right away,” Clerico said. “It’s not financing, but it is a way to get funding quicker.”

WePay also invested in card present technology over the past few years to accommodate multichannel shopping and payments, as well as to address a need among merchants to accept payments and serve consumers while on the move.

That work addressed contactless technology and work with ISVs to include remote digital services with contactless transaction acceptance at the point of sale. “Many of the businesses we work with were already planning to go ahead and pivot to cards-not-present,” Clerico said.

JPMorgan Chase recently extended Paycheck Protection Program applications to August 3, and was approved to lend about $29 billion to 239,000 businesses. Chase used records from existing relationships to streamline compliance and underwriting

WePay is not directly involved in PPP lending, though as a unit of JPMorgan Chase there is overlap between business banking and payment processing clients. As Congress considers extending PPP, the partnership between banking and payment operations can expedite loan processing, contends Clerico, who worked in technology investment banking at Jefferies & Co. before starting WePay. He advised software, digital media and financial technology companies on capital markets and merger and acquisition transactions. Clerico also worked for the U.S. Army’s Communications Research Command and in electronic trading at Goldman Sachs.

“Be flexible. A lot of pundits like to speculate, but nobody really knows where this is all going to land,” Clerico said. “That means being smart about expenses; it means being flexible about the office and real estate presence. Nobody knows if this is going to last three months or three years.”

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Fintech Coronavirus B-to-B payments Retailers WePay JPMorgan Chase
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