The National Crowdfunding and Fintech Association of Canada (NCFA) has written an open letter to prime minister Justin Trudeau calling on the government to use fintech firms to distribute capital to small businesses during the Covid-19 pandemic.
As governments around the world rush to get funds to struggling firms during the coronavirus lockdown, many are turning to bank alternatives as part of the solution. In the US, PayPal, Intuit and Square are among those being used to distribute loans.
Canada's regulators and policymakers should follow suit, says the letter, and work with fintech players such as online lending and crowdfunding platforms, which already have the software for onboarding, screening, approval, distributing and servicing of loans and investments.
The NCFA uses the example of the UK to make its case, noting that the government turned to new players such as Starling and OakNorth to distribute loans after traditional lenders took too long to get the money out the door.
The urgency of the situation is seen in data which shows that the average business in Canada has less than 30 days of cash on hand to weather the storm.
Says the letter: "Fintechs have frontline insights on the pain Covid-19 is inflicting on small businesses and entrepreneurs. These fintechs can help to distribute financial support more quickly and cost-effectively, complementing the bigger financial intermediaries players who are slower due to their legacy IT systems."
Government should support and recognise Canadian fintechs as a "key part of the financial solution" says the NCFA, adding that "the sooner we understand that our regulation and policy frameworks need to holistically include the value that new fintech models and digital infrastructure brings, the faster the economy will get back on track".