Fintechs getting a boost from coronavirus outbreak

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American Banker | Penny Crosman | March 18, 2020

digital mortages - Fintechs getting a boost from coronavirus outbreakThe coronavirus pandemic could be devastating for many companies, but it's also shining a spotlight on the power of fintechs. They seem to be responding to the sudden challenge, though uncertainties lie ahead.

The virus-driven moratorium on travel and the trend of companies encouraging people to work from home are changing the way people behave and communicate, and some of these changes could become permanent.

“The behaviors that people can execute from their living room or from their den are going to grow, and behaviors that require face-to-face interaction or getting out into the community are going to diminish,” said Nigel Morris, managing partner of QED Investors and a co-founder of Capital One. “What does that mean? You should have greater mobile apps and digital adoption in general. If I had been holding off on signing up for PayPal, for instance, I might just do that.”

Fintechs that help people do things remotely, like communicate about work, apply for a mortgage or make electronic payments, appear to be thriving, at least so far.

Digital mortgages

The digital mortgage software provider Blend, which has 230 bank clients, has also seen spikes in usage.

Each business day since March 4, the volume of refinance applications running through Blend has been up 1500% to 2000% from the same days last year. Most days, the company has also seen an 85% to 95% increase in mortgage purchase applications from the same days last year. With these increased volumes, the entire Blend platform sees between 15,000 and 20,000 applications per day and is processing daily loan values as high as $8 billion.

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Bank and credit union clients have been telling the vendor that their volumes are spiking, but that using an online application helps them handle increased demand better than forcing customers to call an 800 number and wait on hold.

Timothy Mayopoulos, president of Blend, said the coronavirus is creating an additional sense of urgency for financial institutions that may have been on the fence about investing in digital mortgage technology before.

“But there has been interest in digital technology for lots of other reasons before and will continue to be,” he said.

Another mortgage tech vendor, Black Knight, has not seen a change in behavior since the coronavirus outbreak.

“Adoption of our digital mortgage tech continues to be strong, but doesn’t appear to be driven specifically by this as of yet,” a spokesperson said.

Julian Hebron, founder of the consultancy The Basis Point, said that banks and other lenders' digital mortgage projects are on hold as they cope with an "avalanche of new refi production as well as hedging and other financial risk that comes with it. Consumer, salesforce and loan production systems in place will be used until this production spike and associated management priorities subside. Then banks and lenders will resume their digital visions to improve customer and employee experience."

Contactless payments

Mobile and contactless payments are becoming more popular as people spurn physical stores for ordering by smartphones, and amid heated debates about whether people can become infected with coronavirus by touching cash.

“We know that money changes hands frequently and can pick up all sorts of bacteria and viruses,” the spokesperson for the World Health Organization told The Telegraph recently. “We would advise people to wash their hands after handling bank notes, and avoid touching their face. When possible it’s a good idea to use contactless payments.”

The mobile and online payment provider PayPal had a good fourth quarter, though the coronavirus outbreak started Dec. 1; it generated 13.3% higher net income than in the third quarter.

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"PayPal is continuously growing," said Kryptoszene analyst Raphael Lulay. “The segment of online payment services is very competitive. Nevertheless, survey data shows that PayPal is in a significant lead. The group is also less affected by the coronavirus pandemic, among other things. PayPal is less dependent on advertising money than, for example, Facebook and Google.”

PayPal itself is cautious about its propects through the pandemic. It recently lowered the guidance of 15% revenue growth it had provided on Jan. 29.

“PayPal's business trends remain strong; however, international cross-border e-commerce activity has been negatively impacted by COVID-19,” the company said in a Feb. 27 press release. “We currently estimate the negative impact from COVID-19 to be an approximate one-percentage-point reduction, on both a spot and foreign currency-neutral basis, to PayPal's year-over-year revenue growth for the first quarter.”

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share save 171 16 - Fintechs getting a boost from coronavirus outbreak