Digital disbursements plug gaps left by Covid-19 relief effort

The global lockdown has forced millions of people to stay at home. Local shops, restaurants and bars are all under extreme financial stress as foot fall has collapsed and the realization dawns that it may not recover swiftly even as restrictions start to lift. 

So, business is innovating – with the help of banking partners.

“We have a client in the UK, which has a number of franchise operations in the bar and pub space,” says Matthew Davies, head of GTS EMEA and global co-head of corporates sales, GTS at Bank of America.

“Overnight, their entire business completely shut down and its franchises were unable to pay staff. While the owner doesn’t have direct responsibility to the franchisee staff, he still wanted to make sure that they received some pay, given the troubling situation.”

In these types of situations, Bank of America can deploy advanced digital disbursement technology to enable the business owner to transfer money directly to the accounts of workers across the franchise.

It is the kind of technology that can be applied widely.

In cases of disaster relief, where some charities and NGOs have, in the past, been forced to transfer physical cash across borders to reach those is need – often at huge risk – disbursements, especially in countries and regions where mobile phone coverage is widespread, can be made into digital wallets instead. 

“In some instances, all you need is a phone number or an email address to identify the right person, and funds can be distributed immediately,” says Davies.

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In the UK, the government has said that support for the self-employed will not hit bank accounts until June.

Meanwhile, its new 100 % guaranteed so-called bounce back loans of £2,000 to £50,000 for micro businesses opened for applications on May 4.

The country’s leading banks reported tens of thousands of submissions on the first morning. This is a test of their processing capacity and ability to perform know-your-customer (KYC) checks on new borrowers at speed.

It is crucial that these big banks who offer the Bounce Back Loan Scheme follow the correct regulatory measures and introduce relevant regtech and automation technology to cope with this influx of demand 

 - Wayne Johnson, Encompass Corporation

Wayne Johnson, chief executive of Encompass Corporation, a KYC provider, says: “It is crucial that these big banks who offer the scheme follow the correct regulatory measures and introduce relevant regtech and automation technology to cope with this influx of demand.”

Some banks may struggle to do that.

Digital disbursement of funds could help. 

“We have seen a number of new mandates for digital disbursements over the last month or so,” says Davies. 

“The crisis has elevated the importance of digital solutions to overcome the protocols of shelter in place and physical distancing,” he says.

Investing in technology has created strong foundations for some transaction bankers to support clients and individuals.

“On-boarding used to be an arduous task, but over the last few years many banks have learnt to make this much more user friendly through developments in technology,” says Davies. “We have learnt a lot from speaking with our clients and partnering with fintechs to help us simplify and streamline the process.”

Bank of America is leveraging application program interfaces (APIs) to tap into data sources and on-board new suppliers. 

In fact, open-banking services and API traffic was up by 30% across Bank of America’s digital channels between March and April of this year, explains Tom Durkin, global head of digital channels in GTS at the bank.

“We didn’t expect such a large spike,” says Durkin. “We assumed the focus would be supporting our own bankers and that our clients would access existing products and tools remotely, but in fact we have seen increased demand of digital tools across the board.”

Where corporates have difficulties adopting new technologies, transaction bankers are on hand to help them.

“We have to support clients through this journey,” says Davies. “The support we offer them now – financial, practical or through our own tech capabilities – will help further develop both the direction of their business and our relationship with them when things eventually go back to normal.”

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The combination of government guarantees and technology, and the fact that the banking sector is in better shape than it was before the global financial crisis, doesn’t mean that banks will lend without doing proper due diligence.

“We have responsibilities to both shareholders and clients, and we are continuing to find the right balance given the current situation,” says Davies.

“Multinational corporations – where our transaction banking business focusses – are in a good position to weather the storm, as they are well supported by a large number of banks with credit available to them,” he says.

“Some smaller companies within the supply chain that do not have the same support may face significant challenges, however.”