On 8 April, APRA warned that it will not issue any new licences for at least six months, saying it does not consider it “prudent” to issue new licences when the coronavirus outbreak is already making it harder for established companies to operate.

But the suspension has been blasted by Australia’s fintechs.

“APRA’s decision to withhold providing banking licences [will] stifle innovation when it’s needed most,” said Rebecca Schot-Guppy, general manager of FinTech Australia.

“A minimum six-month delay to licensing could collapse fintechs seeking this license and cost us jobs, they can’t afford to tread water for that long.”

Ms Schot-Guppy disagrees with APRA’s premise that the outbreak will make it harder to new entrants to succeed, arguing that some of the “world’s greatest start-ups” – including Square, Slack, and WhatsApp – were all founded during the GFC.

“Australia should instead be welcoming new entrants, giving them the ability to compete and supporting fintech and major company partnerships,” Ms Schot-Guppy said. “Many companies have expedited their own digital transformations in lieu of COVID-19. Fintechs partnerships play a key role in transforming existing financial services, but they can only do this in a supportive regulatory framework.”

APRA made the decision not to issue new licences due to a “fundamental change in the economic and social environment in Australia”.

“In licensing new entrants to the prudentially regulated segments of the financial system, APRA aims to achieve an appropriate balance between financial safety and other important considerations to the community – efficiency, competition, contestability and competitive neutrality,” APRA chairman Wayne Byres wrote in the letter. “In doing this, APRA is also asked to promote financial system stability in Australia.”

“Experience has shown that it is challenging for new entrants to succeed even under normal economic conditions, which is why APRA does not consider it prudent to license APRA-regulated entities at this time.”