How the Government Shutdown is Impacting the FinTech Sector
Now in its second month, the current partial federal government shutdown is easily the longest in United States history. This extended shutdown has not only had a direct impact on thousands of federal employees and their families but has also affected various private sector businesses in some unexpected ways. As Forbes reports, several FinTech firms are among those hit by the shutdown as well.
Easily the most talked-about aspect of the shutdown as it relates to FinTech and tech in general is how it has interfered with companies’ plans to go public. With the Security and Exchange Commission closed for business, those working with the regulators to prepare their IPOs are having to put their plans on hold. One of those companies that has recently made steps toward going public is Robinhood. The investment app hired a Chief Financial Officer last fall, with co-founder/CEO Baiju Bhatt stating at the time that a public offering was in the “medium to long-term” for the firm (granted, that was before the recent debacle the app experienced).
While a delayed IPO is one thing, the absence of the SEC has much larger consequences for several in the FinTech sector. For example Forbes notes that, during the shutdown, lenders are unable to get approval to sell loans to investors. As Rally Rd co-founder and CFO explains, “It’s interesting to see the SEC come to a screeching halt. On a normal day, the SEC is churning out incredible work and keeping the financial system operating. When something like this happens literally some of the biggest companies in the country’s businesses are coming to a halt.”
It’s also interesting to note that the shutdown may actually bring more customers to online lenders. That’s because the Small Business Administration (SBA) has also been shuttered, leaving the agency unable to process small business loan requests. In turn, entrepreneurs may be forced to explore other options. Similarly federal employees who have been furloughed or are currently working without receiving paychecks may also be seeking personal loans from alternative lenders.
Obviously the troubles that some FinTechs are facing as the government shutdown rolls on pale in comparison to those that many individuals in the public sector are dealing with. Yet it is another reminder that the effects of the shutdown extend further than one may realize. On top of that, the on-going incident raises more questions about regulatory oversight of FinTech at a time when regulators are looking to protect consumers without stifling innovation. With no signs of reaching resolve just yet, these various problems seem destined to only get worse in the coming days and weeks.