A new era of banking took the technology world by storm this year. As the COVID-19 pandemic challenged everyone, small businesses took one of the largest hits. As such, big-name fintechs like PayPal, Square, and Stripe launched new banking initiatives to support struggling clients.
PayPal continued to lead the charge with the launch of QR-code payments, “buy now, pay later” options, and by distributing small business loans. Payments processor Square was granted permission to open a traditional bank, allowing the fintech company to now distribute loans to small businesses. And tapping into Square’s banking services, Stripe launched its own unique loan “ecosystem,” now allowing its clients to issue loans to their own clients.
PayPal Set the Pace for Digital Fintech Innovation in 2020
- PayPal (along with subsidiary Venmo) led the fintech charge in 2020 as it offered services that connected consumers with merchants during the COVID pandemic.
- The fintech recently rolled out QR code payments at 8,200 CVS locations, debuted its own buy now, pay later program, and rolled out its own Venmo credit card.
- The Gap and DoorDash also joined PayPal as its latest merchant partners.
- PayPal has over 364 million active users, while Venmo has over 65 million users.
Few companies were as well-primed to face the e-commerce challenges of the COVID-19 pandemic as PayPal. The online payments company posted two record-breaking quarters on the heels of an eight-month lockdown period that saw 10 years of e-commerce growth in its first three months alone.
By forging strategic partnerships with brands like DoorDash and the Gap, distributing small business loans, launching its own “buy now, pay later” functionality, and even implementing QR-code payments, PayPal has been able to uphold its place as a leader in digital payments.
CVS Launched QR Code Payments with PayPal, Venmo
- CVS became the first national retailer to offer contactless payments, through a partnership with PayPal and Venmo.
- Customers are now able to pay for their purchases by scanning a QR code at checkouts in-store.
- The partnership was first announced in July and has now been implemented at 8,200 CVS locations across the U.S.
As touch-free commerce remained of importance to consumers during the COVID-19 pandemic, CVS brought a new form of contactless retail to its U.S. stores, announcing on November 16 that QR code-enabled payments would become available at 8,200 locations across the U.S.
CVS customers can pay for purchases in-store, using their linked accounts on their PayPal or Venmo apps on their mobile devices.
“The launch of PayPal and Venmo QR codes in CVS Pharmacy stores will not only provide health-conscious customers with a touch-free way to pay at checkout, but also brings the safety and security of PayPal and Venmo transactions into the store with shoppers,” said Jeremy Jonker, SVP of digital commerce at PayPal.
Square Granted Approval To Open Bank in 2021
- Square applied and was approved for “deposit insurance” from the Federal Deposit Insurance Corporation (FDIC).
- This move means Square is applying to become an industrial or commercial bank, and would allow it to offer business loans and other deposit products to its customers.
- Square has previously applied to become a bank twice before but finally succeeded.
Square, the payment processor loved by small-to-medium businesses around the world, took a huge step this year by getting the green light to open a commercial bank and offer business loans and deposit products.
After getting approved on a number of factors, including the financial institution’s history and condition as well as the future earnings prospects of the institution, Square plans to use its new status to offer small business loans to merchants using its services.
Intuit, Square Approved to Distribute COVID-19 Relief
- Following in the footsteps of PayPal, non-bank fintechs Intuit and Square were approved to distribute direct loans to small businesses through the Small Business Administration’s Paycheck Protection Program (PPP).
- PPP was a $350 billion program designed to support small businesses with under 500 employees in staying open and keeping employees on payroll through the COVID-19 pandemic.
- Fintech companies are the perfect intermediary to offer loans, as many businesses already work with them and are familiar with their practices.
- Companies have been reporting slow approvals with traditional banks and rejected applications due to the businesses and banks having no prior relationship.
Square and Intuit joined PayPal this year in becoming approved loan distributors for PPP. The three fintechs were able to send out portions of the $350 billion program to businesses under 500 employees in the U.S., with a goal of keeping as many workers on payroll as possible during the COVID-19 pandemic.
Square and Intuit hope to streamline the loan approval process and help put route money more quickly to small businesses that need it.
“We are focused on getting help to customers as quickly as possible as they navigate this unprecedented and challenging time,” said QuickBooks (an Intuit subsidiary) EVP and GM Alex Chriss. “As the financial source of truth for millions of small businesses, we have a unique opportunity to help remove friction from the system. QuickBooks Capital will automate much of the application process so small businesses and other eligible applicants get relief quickly.”
Stripe Launched Online Loan Ecosystem Through Stripe Capital
- Stripe Capital, the enterprise wing of payments processor Stripe, will now allow online platforms to offer financing to their customers.
- Stripe Capital will provide businesses with an end-to-end lending API that enables platforms to issue loans to online merchants, without having to build their own lending solution.
- Jobber, the home service management software provider, and Lightspeed, a POS platform, have already signed up for the new Stripe Capital service.
Stripe, the massive payments processor, expanded its Stripe Capital roster of tools, launching a new service that allows businesses that operate via an online platform to offer loans to their customers.
With the new service offering, Stripe customers and business clients, who have been able to access financing solutions since 2019, can now offer their own clients small loans. Loans are issued through bank partners and can arrive in the customer’s account within one to two days of approval. Jobber and Lightspeed, two Stripe Capital business clients, signed up for the program this year.