Exclusive: ‘How a ‘hacker’ mindset is responding to COVID-19′ – Lubaina Manji, Nesta Challenges in “The Fintech Magazine”

Lubaina Manji, Senior Programme Manager at Nesta Challenges, on the transgressive fintechs taking their place on the financial frontline and how it’s supporting the new wave of responders.

It’s widely recognised that banks are now comfortable collaborating, rather than competing, with the UK’s fintechs and I believe one of the main factors behind this is a fintech’s agility and ability to quickly pivot.

It’s these same qualities that make UK fintechs an integral part of the economic response to COVID-19, and we are seeing a huge wave of innovation already in the works.

I’m reminded of a recent piece by Financial Times innovation editor John Thornhill, in which he wrote about ‘hacker mentality’ and incremental innovation. He argued that you need hackers to rattle the status quo and that organised hackathons are a way to find solutions to our biggest problems, provided the ideas are implemented. As he put it, a ‘tech-for-good mentality may yet prove one of the most effective means of coping with the complex challenges of the 21st century’.

This mentality is something we’ve definitely seen in the UK fintech scene over the past few weeks. This sector has huge potential to draw on the data provided by open banking to adapt its products and services to better support the population as we continue to struggle through the coronavirus outbreak and its ramifications for our health, wellbeing and finances.

Open Banking Limited has been compiling a list of the huge number of fintechs adapting their services to the current situation on the #PoweroftheNetwork section of its website. One of the most notable fintech contributions to the battle so far is the Covid Credit calculator, which was developed over a weekend by a collaboration of fintechs, including Fronted, 11:FS and Credit Kudos – an idea sparked by a conversation on social media. Together, they rapidly created a platform that could help self-employed workers prove a loss of income if needed as proof for new government benefits.

It is this type of problem-first thinking that originally led Nesta Challenges to develop the Open Up 2020 Challenge, in partnership with the UK’s Open Banking Limited. The Challenge launched last summer and 15 finalists have secured funding from a £1.5million prize pot to develop innovative solutions that use open banking to transform how people across the UK manage their finances.

Research conducted to mark the launch of the Challenge last summer identified millions of people already struggling to stay on top of their finances. One in three (29 per cent) said they regularly run out of money each month – equating to around 15.2 million people – and it’s safe to say that the impact of COVID-19 has made this situation even worse. Between the start of lockdown on 23 March and 5 May, 2.5 million people applied for universal credit, compared to the usual 220,000 per month, and our latest research found nearly half (45 per cent) of people who are concerned about their finances are cutting right back to basics, while 31 per cent are reducing any unnecessary costs.

All the solutions the finalists are working on as part of the Challenge use open banking data to help their users better manage their money. But many of them – like other fintechs across the UK – have now pivoted to focus on new, pressing issues fuelled by COVID-19.

For example, Wagestream, a service allowing people to access unpaid wages when they need them, has released a number of new features designed to ease financial difficulties during the pandemic. This includes immediate overtime payments for under-pressure healthcare workers; anyone who logs an overtime shift as COVID-19 can now access 80 per cent of the wages earned immediately.

Meanwhile, digital debt adviser Tully recently revealed that with pay cuts, reduced hours, furloughing and redundancies, in excess of 17 million people have suddenly found it much harder to meet their usual bills and payments. In response, the Nottingham-based fintech has announced the launch of its COVID-19 Relief and Wellbeing Network to help people financially impacted by the crisis request payment holidays from companies like utility providers and credit card companies.

Another finalist, Canopy, has launched a solution for existing renters who are struggling to make ends meet, allowing them to purchase a deposit replacement insurance policy to unlock the money tied up in their rental deposits. This could prevent tenants who are in financial difficulty getting caught in a spiral of debt and also provides added protection for
life events such as critical illness and job loss and – now – COVID-19. Canopy will also be contributing £10 from each policy sold until the end of June 2020 to frontline NHS workers and homeless charitable organisations in support of the life-saving work being undertaken.

Other finalists that are making changes include budgeting app Moneyhub, which has extended its free trial from one month to six months, and Cleo, which has published a range of tips and tricks on social media to help users make more of their money when staying at home. Portify, which is focussed on supporting gig economy workers, also recently announced it would offer zero per cent interest advances to select members on expected Self-Employed Income Support Scheme grants, to help them while waiting for the grants to kick in. This announcement was made after it found that the income of gig workers dropped by 30 per cent in April.

We’ve been extremely impressed with how all of our finalists have adapted to these difficult times and, particularly, how they have remained focussed on supporting struggling customers. No one could have predicted the situation that we’re now in, and the future seems equally uncertain. However, we’re very lucky to have a burgeoning fintech industry in the UK that continues to work on adaptive solutions that meet the ever-changing needs of society. I’m sure this proactive ‘hacker’ mindset will lead to even more innovation in the coming months.

The transgressive thinkers rattling the status quo

Portify, which has extended free credit to gig workers during the pandemic, was set up in direct response to changed (and often less secure) working patterns. Founded in May 2017 by Sho Sugihara (CEO) and Chris Butcher (CTO), it closed a £7million Series A funding round at the end of last year to help address the financial volatility many modern workers face, especially those who take part in the gig economy or are self-employed in sectors such as the creative industries.

Credit Kudos, one of the driving forces behind Covid Credit, went through a recent £5million Series A raise, led by AlbionVC, which was joined by Triple Point, Plug & Play Ventures, Ascension Ventures’ Fair by Design fund, and Entrepreneur First (EF). A number of fintech angels also participated. Co-founders Freddy Kelly, who started his career in Silicon Valley including with Bitnami and TXN, and Matt Schofield, who was involved in the team at Universal Music that used consumer listening behaviour data to more effectively invest in musicians underserved by the major record labels – both saw an opportunity to flip the data paradigm to empower individuals. Their aim is to build a more inclusive financial system for those overlooked by the traditional credit bureaus.

Wagestream, which works with employers to allow employees to draw down a percentage of their income in the month for a small, flat fee, recently closed a Series A round of £40million. It has two simple goals: to destroy the pay day loan industry and to give UK workers financial freedom. CEO and co-founder Peter Briffett is a serial entrepreneur with experience founding, scaling and selling businesses.

Tully, founded by Steve Bradford and Stuart Bungay in 2018, uses open banking technology to give people a holistic picture of their financial position in minutes – all done online. Free to use for consumers, it works with them to build an accurate budget on which it bases its free debt advice and a personal plan to get users where they want to be. That includes the option to choose a flexible debt repayment plan that adjusts to the user’s financial situation every month.