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Fintechs Help Disburse $1,200 Stimulus Checks

By Bram Berkowitz - Updated Apr 15, 2020 at 4:34PM

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The participation by fintechs shows just how important to the banking system they are becoming.

U.S. banks have been called on to disburse hundreds of billions of dollars in government aid to struggling businesses and citizens hit hard by the novel Coronavirus pandemic.

But they aren't the only ones.

With 80 million Americans expected to receive $1,200 stimulus checks from the $2 trillion stimulus by Wednesday, fintech and payments companies are stepping in as well, showing they too can do the work of traditional banks.

Paypal

Image Source: Getty

PayPal Holdings (PYPL -2.61%) and Square (SQ -6.46%) are two of several companies approved by the government to disburse the stimulus checks and emergency federal small business loans.

PayPal announced recently that people can receive their stimulus check through their PayPal Cash Plus account using direct deposit.

The participation of fintechs in a process normally handled by traditional banks shows just how far these technology-heavy players have come in the world of financial services.

"For the 25% of Americans outside of the financial system, digital payment [systems] like PayPal provide the ability to participate in the digital economy, while also avoiding costly fees," Tom Hunter, a global consumer communications representative at PayPal, told Fox Business. He added, "By electing to receive the payment through PayPal, recipients can avoid going to a physical check-cashing location, or even missing a paper check if they are sheltering in place at a different address to their registered address."

In some instances, fintechs may be outperforming traditional financial service players.

Banks like Truist and Fifth Third Bancorp reported online outages today due to the surge of people checking their bank accounts for stimulus checks.

Meanwhile, the digital private bank Current has claimed that its "users are literally the first in the country to have received the stimulus checks." 

Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends PayPal Holdings and Square and recommends the following options: short September 2020 $70 puts on Square. The Motley Fool has a disclosure policy.

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Stocks Mentioned

PayPal Holdings, Inc. Stock Quote
PayPal Holdings, Inc.
PYPL
$99.42 (-2.61%) $-2.66
Block, Inc. Stock Quote
Block, Inc.
SQ
$80.33 (-6.46%) $-5.55
Truist Financial Corporation Stock Quote
Truist Financial Corporation
TFC
$51.20 (-1.56%) $0.81
Fifth Third Bancorp Stock Quote
Fifth Third Bancorp
FITB
$37.23 (-1.04%) $0.39

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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