This article is part of a Fortune Special Report: Business in the Coronavirus Economy—a look at the impact of the pandemic on more than 50 industries.
In the wake of the Great Recession, as lawmakers passed the Dodd-Frank legislation to rein in an ignominious financial industry, one paragraph of the law also validated a rebel contingent of reform-minded entrepreneurs. The passage mandated that banks must make consumers’ data available to them “in an electronic form.” And so was born the fintech industry.
Now, as the novel coronavirus presents the world with its biggest economic challenge in more than a decade, fintech is having a moment of truth. Companies like SoFi, Robinhood, Chime, and others were built on promises of providing consumers and businesses with easier access to money in all its forms—investments, credit, person-to-person payments—via the Internet, and often without dealing with a brick-and-mortar bank. With the global economy largely on pause, millions of people abruptly out of work, and thousands of bank branches shuttered, the time for fintech to deliver on those promises has arrived. As the U.S. government passed a $2 trillion stimulus package in March, including forgivable small-business loans and $1,200 checks for Americans, Treasury Secretary Steven Mnuchin stipulated that “any fintech lender will be authorized to make these loans”—a historic first. In April, these platforms earned further validation when the Internal Revenue Service allowed eligible recipients to elect to receive stimulus payments electronically—through Square’s Cash App, for instance, or Venmo—rather than by paper check.
PayPal, Square, and other fintech players are heeding the call to help. In between calls with the Treasury Department, Dan Schulman, PayPal’s CEO, has been holding daily videoconferences with employees from his home office in California. “One of the things I’m telling them is, this is our time,” he tells Fortune via Skype. Even before the IRS began disbursing stimulus money, Chime, the largest so-called challenger bank in the U.S., went out on a $20 million limb—giving more than 100,000 customers immediate access to as much as $1,200 through an interest-free payday advance. “We felt that this could create some sort of industry movement,” says Chris Britt, Chime’s CEO.
Indeed, consumers holed up at home are relying on financial apps in record numbers. New sign-ups at PayPal, along with its peer-to-peer payment app Venmo, have been double the pre-pandemic norm on recent days. They’re also using the apps in ways they weren’t designed for, such as to donate money to struggling individuals or to fund needed equipment for health care workers—totaling tens of millions of dollars. When Taylor Swift, the pop star, recently sent a surprise $3,000 “gift” to dozens of her fans who’d lost jobs or income as a result of the coronavirus, she did it via PayPal. It’s no coincidence that Venmo payments using the medical-mask emoji surged 375% in March, according to the company.
The crisis has become a proof-of-concept for fintech, one likely to change the way people bank and move their money even after they can visit a teller in person again. Says Zach Perret, CEO of Plaid, a startup whose software powers virtually all the major U.S. fintech apps (and which Visa recently agreed to acquire): “This shutdown time, I’ll suspect we’ll look back and say this was one in which digitalization really accelerated.”
Clarification: This article has been updated to reflect that Visa’s acquisition of Plaid is not yet complete.
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