Three quarters of fintechs in the UK are unhappy with the amount of government support during the coronavirus pandemic, according to a new survey.
The latest report from the Digital Finance Forum found that only 25 per cent of fintechs believed that the government had done enough to support digital banking businesses during the pandemic.
Founders told the survey they wanted loosened rules on state-backed investment schemes, as well as more engagement by the government with the sector.
Two thirds (65 per cent) of founders didn’t think the voice of fintechs is properly heard in UK policy and regulatory circles.
Unsurprisingly, 90 per cent of founders believed that COVID-19 has made, or will make, it harder to raise finance in the next year.
Nearly half of those surveyed (46 per cent) mentioned limited access to capital as the most pressing challenge facing them, and the main impact of COVID-19 upon their business. Access to institutional funding lines had been severely hampered, they said.
Government-backed lending schemes during the pandemic “were unduly tailored to banks,” according to some start-up founders, who said they believed that banking start-ups were an “afterthought”.
Specifically it was pointed out by numerous financial technology start-ups that the government’s EIS and SEIS rules specifically exclude investment in many types of financial services businesses; and that the British Business Bank’s own funding of venture capital funds excludes those VCs from investing in many financial services businesses.
“Fintech is not on a level playing field with other stage companies, when it comes to access to capital,” said the second Digital Finance Forum Summer Survey.
Over 100 fintech founders took part in the annual survey.
Over two fifths (43 per cent) were primarily lending companies; a further third (34 per cent) listed digital banking/payment as their main activity.
Two thirds (65 per cent) were small businesses (with 50 employees or less), while a quarter (25 per cent) had turnover of more than £10m.
Overlooked by Treasury
Christian Faes, co-founder and chief executive of LendInvest and chair of the Digital Finance Forum, wrote in CITY AM that the sector has felt “overlooked by the Treasury in a number of ways and has faced issues that the available support hasn’t been able to alleviate. This ranges from liquidity solutions for fintech lenders, through to problems with the Coronavirus Business Interruption Loan Scheme [CBILS] itself — most banks have rejected fintechs from obtaining loans through the scheme.”
It was not surprising, wrote Faes, that nine out of 10 fintech founders believed that COVID-19 would make it harder for them to raise finance in the next year.