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What’s the impact of coronavirus on FinTech?

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Someone asked me what the coronavirus pandemic means for the future of FinTech. I guess they thought that not much is happening and many firms will shutter and close. However, some may think that times are dull and boring, locked in at home and nothing going on, but there’s loads happening in the FinTech community. Critically, what’s happening is pivoting and switching strategies to deal with the new world.

Some are acting fast to respond to customer needs, like Chime who offered to get government benefits direct to citizen via an app; or Railsbank who created Lightning Aid to get support to people direct during the crisis.

Then there are the major deals that have been struck, such as Stripe’s new $600 million funding round, which values the firm at $36 billion, up $1 billion on the last valuation in September 2019.

Robin Hood just raised another $200 million, valuing the firm at $8 billion; Revolut completed a funding round just before lockdown that also valued the firm at $5.5 billion, making it Europe’s most valuable FinTech unicorn; and Aussie challenger bank 86400 just got another $34 million in April.

Then there are challenger banks that pre-prepared for the crisis by simulating a pandemic and work at home rule, like Monzo, whose operations have transitioned pretty smoothly from office-based to home-based, unlike many large and traditional banks. Other challenger banks are coming up with new ideas like Starling Bank’s rapid move to issue companion cards for people who were locked in and unable to leave home, due to having existing health issues or being over seventy years old. The companion card allows them to give a family member or friend a prepaid card to do their shopping for them, with top-ups direct from the Starling account.

So, things aren’t that quiet. Business is still being done, start-ups are still starting and things are moving on.

However, there have been some hits, and I wonder what will happen to those FinTech start-ups that were just reaching a funding round. What will they do with their staff? Their people? Their customers? If they were running out of money, what will they do? How do you do a funding round when you can only reach investors via Zoom? This will be challenging.

We’ve already seen some companies pivot their strategies as a result. For example Moven, the American challenger bank launched in 2011, has now sold off their consumer-facing business to Varo Money, and a survey by the Swiss Blockchain Federation found that the crisis will force four out of five blockchain start-up firms to close.

This is unsurprising when you see the numbers. According to research firm CB Insights, the first quarter of 2020 has seen venture capital backed fintech funding drop to $6.1 billion, across 404 deals worldwide. That’s the worst Q1 since 2016 for fintech deals, and the worst Q1 for funding since 2017.

My own feeling is that the coronavirus crisis will force any cash-strapped firm to fold. Cash is king in a crisis like this. Not physical cash notes, but money on tap. Liquidity. Equally, debt and costs are a critical factor. Any firm that has new hires, offices, physical infrastructure and more will struggle. Any cash out and no cash in is the issue.

This was brought home to me when I saw an article about a Silicon Valley start-up called Bird, who sacked a third of their staff in a two minute Zoom call delivered by the CEO’s Personal Assistant. Equally, WeWork and other leading unicorns are clearly struggling before the crisis hit, and most certainly will be worse today.

What’s the answer?

Well, the answer is back to my opening points. Companies that shine in this crisis, doing the right thing for customers and society, innovating and ideating, will exceed expectation post-pandemic. Companies that act like monsters during the crisis, treating their customers and staff badly, will fail.

It will be interesting to see how all this pans out.

Finally, there is a comment that most start-ups fail due to a lack of customers, not a lack of funding, and this crisis has been a hard time for all start-ups whether visionary, growing and with customers and funding or without. That is illustrated well by Monzo's latest annual report, which highlighted “material uncertainties that cast significant doubt upon the Group’s ability to continue as a going concern” due to the pandemic.

Even the strongest may not be able to adapt to this change fast enough.


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Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog,, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...

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