Speed matters during a crisis. Here's how tech can help.
Financial technology needs to be a part of the policy and economic toolkit as the world is at a near-standstill during this coronavirus pandemic, sending financial shockwaves through many businesses and households.
While current governmental measures — including monetary and fiscal stimulus — are steps in the right direction, it is often deployed through legacy systems and processes that can be slow and untargeted in their impact. More creative actions can be deployed now to leverage the benefits of technology during this crisis.
First, online lending models developed over the past decade do a few important things well: it can underwrite quickly (usually by analyzing cash flow from seamless integration with bank and payment data); it can promptly verify identity; and deploy capital fast.
Read more: Complete coverage of the coronavirus impact.
Former Fed Gov. Kevin Warsh recently argued that the Fed should solve for a pending solvency crisis by lending through banks to viable businesses. Whether it is through a Fed program or expanded SBA program, the government should also look beyond banks and consider partners like PayPal, Square, OnDeck, Kabbage and Funding Circle in order to rapidly deploy capital to businesses that otherwise will not receive funding from the traditional banking sector.
Second, crowdfunding has potential and should be revisited to drive local community support for small businesses. OpenTable recently published troubling data on the early impact of coronavirus on the viability of restaurants. This is only going to get worse given mandatory shutdowns of onsite services.
Many have wisely suggested that everyone support their local small businesses, like restaurants, bars, and fitness and wellness centers, by purchasing gift or prepaid cards.
Platforms like Groupon could advance such efforts by creating city or community-based pages where local merchants could offer these kinds of options (even if discounted) in order to generate cash flow during a shutdown period.
Similarly, if OpenTable, Mindbody and other related aggregators helped to organize and launch community crowdfunding sites — either directly or through existing platforms like GoFundMe, Indiegogo or Kickstarter — there would be more efficient and coordinated access to providing donations, or purchasing such gift cards.
Beyond donations and gift cards, there is also the potential to use equity crowdfunding as a way to help capitalize local businesses. Regulation Crowdfunding (or equity crowd-investing) allows people to invest small sums into small businesses pursuant to an SEC exemption through platforms like Wefunder, Microventures and SeedInvest.
The SEC recently proposed expanding the cap on the amount a small business can raise through the exemption from $1 million to $5 million. It’s unclear whether the SEC can expand this cap faster during this time of crisis, but the option remains available for individuals to invest in local small businesses. This option should be considered and leveraged in creative ways to directly invest in and support local economies.
Third, the current crisis highlights the importance of upgrading the entire financial infrastructure in order to increase the ability to target, and the speed to deploy, emergency relief.
One avenue worth exploring (including through efforts like the Digital Dollar Project) is how a potential/contemplated tokenized U.S. dollar could allow in times of emergency an immediate and direct transmission of USD from the government to individuals. These funds could be used for fiscal stimulus, payment of unemployment benefits, or small business funding needs.
Speed matters during a crisis, and digital infrastructure is critical to maximizing a quick and efficient response.
Finally, though it’s not traditionally considered Fintech, the Internet has allowed for the blossoming of a freelance/human capital industry whereby individuals around the globe can offer their talents and services to businesses pursuing a range of creative projects.
Platforms like Fiverr, Upwork and PeoplePerHour aggregate these services, and would be a good destination for many talented people who will likely be furloughed in coming weeks. Companies and ventures with the capacity to invest should consider hiring such talent, and move forward with projects that are rarely prioritized but can now move forward given current circumstances.
Like all things during a crisis, the suggestions stated are intended as a triage effort to think creatively about what everyone can do now to support the American people, communities and economy.
Broader creativity and thinking is critical right now, and the power of technology and digital can be leveraged to keep moving forward. The financial and tech industries should use all of the tools at their disposal during this downturn, and emerge stronger for it.