Fintechs: Navigating COVID-19

For fintechs, like any other business, cash is king, especially during times of crisis. For those fintechs who manage to get the basics right, recovery will come. With it will come potentially game-changing opportunities for growth in a market more open to digitisation than ever before.

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Emily Spooner
Published: 12 May 2020 Updated: 13 Apr 2023

For fintechs, like any other business, cash is king, especially during times of crisis. For those fintechs who manage to get the basics right, recovery will come. With it will come potentially game-changing opportunities for growth in a market more open to digitisation than ever before.

In this article, we share some insights on what we are seeing with respect to funding and investment in the fintech market; our experience of how fintechs are reacting to COVID-19 and where we consider to be the important areas of focus in the coming months, throughout the recovery phase and beyond.

Fintech funding and investment

Those fintechs that have recently completed a funding round or have a strong relationship with their private equity or venture capital owner (PE/VC) are generally more relaxed about cashflow, and not yet operating in 'survival' mode. They are however still taking precautionary steps to preserve cash in the business, looking to defer VAT payments and maximise R&D tax credit claims for example, especially given the uncertainty over the length of the crisis.

Fintechs who were mid-funding round or starting to look for funding before the crisis have been more impacted. Investors are, in some cases, reconsidering previously agreed valuations, and/or renegotiating terms on deals to give themselves increased protection and/or influence. Other investors are simply focusing on existing portfolio companies and not exploring other investment options at all.

Many fintechs do not qualify for access to the financing announced by the government - such as the Coronavirus Business Interruption Scheme (CBILS) and the Coronavirus Large Business Interruption Loan Scheme - or have been unable to access it. We have heard numerous examples of businesses being told to seek financial support from their investor or PE/VC before seeking support under CBILS. Fintechs, particularly those backed by PE/VC, are therefore looking elsewhere for funding, either to existing investors, or to strategic partners, angel investors, and other businesses in their supply chain.

How are fintechs reacting to COVID-19?

On the whole, well-established fintechs have so far displayed resilience. Fintechs tend to be nimble and able to adapt systems or service/product offerings quickly. They react to market or customer changes much more effectively than more traditional financial services business.

They are also adept at operating remotely, with systems that are digitalised and able to cope with the increased system pressures of a remote workforce.

We are starting to see opportunities for fintechs to grow, as digitisation reaches the forefront of business agendas. The usually lengthy sales cycle of large incumbents is, in many cases, being dramatically shortened as clunky legacy systems are updated to support remote working demands.

Fintechs are also increasingly playing a part in the delivery of financing to businesses under the CBILS. The list of accredited lenders now includes Starling Bank and OakNorth Bank1. The practical delivery of government support packages to UK businesses has to date been widely criticised, with only a small minority of businesses being able to access this financing option. The hope is that these fintechs will be able to deliver the much-needed financing to vulnerable and early-stage businesses more quickly than their larger peers.

Fintechs are nimble enough to pivot their business models, think flexibly and innovate quickly to take advantage of newly created gaps in the market.

What do we expect to see for fintechs beyond COVID-19?

The digital transformation agenda will almost certainly have been accelerated by COVID-19. This acceleration is likely to be true for many businesses operating traditional models, not just banks. Those businesses are more alive than ever to the necessity of investing in technology and implementing digital solutions.

We expect fintechs to play an important role in this digital transformation. We expect to see increasing collaboration and connection between players in the financial services industry, albeit not necessarily in the form of traditional partnerships.

The strategic review of the UK fintech sector by Ron Khalifa, as announced by Chancellor Rishi Sunak in the March Budget, demonstrates the government’s commitment to ensuring growth and competitiveness in the market. Businesses are hoping this signals more investment and support for the fintech industry going forward.

Government legislation that is prevailing at the time, is subject to change without notice and depends on individual circumstances. Clients should always seek appropriate advice from their financial adviser before making financial decisions.

Information sourced from and is correct as at 11 May 2020.

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By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.

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This article was previously published on Smith & Williamson prior to the launch of Evelyn Partners.