Contradiction, confusion and, glaringly, the absence of promised government cash has intensified the crisis now gripping American businesses, from Main Street to Wall Street.
It’s an existential threat that can be mitigated going forward, i2c President Jim McCarthy told PYMNTS, by card products – particularly commercial and corporate cards issued by the existing network of banks and FinTechs – and used inventively to solve acute cash flow problems.
FinTechs, he said, have raised their hands to say, “Let us help. [We] get money to people in need. There is a robust ecosystem of players who want to participate here.”
This latest in a series of PYMNTS “Trend Talks” touches on what may be inflated reports of difficulty accessing commercial credit, and describes a coalition of private-sector players who are connected and ready to rock. America’s financial network can be operationalized fast, McCarthy said, disbursing tranches of government aid safely to help businesses survive.
As to the state of credit after a turbulent March, McCarthy told PYMNTS, “It may feel like there's a lot of credit saturation, but … I would argue that if you look at the purchase of Credit Karma for a couple of billion dollars, as an example … there's room to grow …” for issuers.
That’s more optimistic than the Federal Reserve's mood in March, but McCarthy notes that “…a lot of new entrants … have come into the [credit] space, whether it be on the consumer [side] or now as we see on the commercial side. Companies like Bento for Business, companies like Brex … have innovated in an area that quite frankly had been stagnant … for a very long time."
But the specter of large-scale delinquencies and mortgage failures continues to chill markets now, 12 years later.
Scary as that may be, McCarthy told PYMNTS that COVID-19 is meeting fierce resistance: “…whether you’re the CEO of a large or small financial institution or a FinTech … everyone thinks about what's going on around us … and you realize that you need to do something,” he said.
“The [U.S.] … and other governments around the world are providing liquidity. The programs that have been set up, either through the SBA or through the banks, to get access to liquidity, to keep people employed, or at least have a lifeline in terms of liquidity…” are starting to flow, McCarthy said.
Unlike 2008, when lenders were largely blamed for that meltdown, this time, McCarthy noted, “…The [local and national] banks are participating … the ones that are connected to the central banks,” through which aid monies will flow. But worries over when and how persist.
“When you think about the capital, it's coming from … governments,” McCarthy told PYMNTS. “Unfortunately, no [government] is prepared for a pandemic of this size,” or this disbursement scenario. “Think about the SBA as an example. [It’s] a great administration trying to do the right thing. But their website keeps going up and down, and they're just getting bombarded in ways no one had expected.”
Since it’s not the model of most FIs – and certainly not the U.S. Treasury – to scale suddenly in risk-heavy environments, McCarthy said this is FinTech turf: “…. what they do very well is … scale.”
Of major importance is the superior front-end consumer experience that banks and FinTechs have built, ready and waiting. “It's … the ‘tech’ side of FinTech that can actually build better experiences, connect faster [and] use new rails” to speed relief along, McCarthy told PYMNTS.
“But the ‘fin’ part of it comes from the banks,” he said. “The FinTechs have focused on the front-end experience … [giving] access in a distributed way … to small businesses to help them get [SBA and PPP] requests in, combined with the banking ecosystem that has the safety, soundness, security and connectivity back to central banks.”
“I think [that is] where this all starts to come together,” McCarthy said.