Fintechs are being disproportionately impacted by the COVID-19 pandemic, with many that do not fit the criteria for government relief now facing the prospect of laying off staff and potentially closing down shop.
In question is the government’s wage subsidy, which is “inadequate” to address the needs of fintechs and start-ups.
“The wage subsidy’s requirement that turnover decreases by at least 30 per cent from March 2019 means that fintechs that are high growth, or ones that have not been trading for 12 months, cannot be eligible for the wage subsidy,” FinTech Australia wrote in a submission to the Senate. “In respect of a high growth business, a 30 per cent reduction in turnover revenue represents a figure higher than 30 per cent.”
FinTech Australia, which represents over 300 Australian start-ups and fintechs, suggests the use of bridging finance tied to a two-year repayment timeframe and conditional on businesses not laying off employees, and the bringing forward of the government’s R&D incentive payments.
“The time to act is now in order to prevent an irreversible market shock to the fintech sector,” FinTech Australia wrote. “Anything the government can do in maintaining confidence, supporting investment and keeping people in jobs across the fintech sector during the crisis is key to maintaining the upward trajectory of increased competition in the banking sector.”
FinTech Australia offered up a number of examples of businesses failing to meet subsidy criteria, including one with 160 staff that could be ineligible as it wasn’t trading 12 months ago. The business has asked all staff to take a 20 per cent salary reduction in order to minimise short-term redundancies. Another member – an enterprise software company that generates revenue through annual licensing deals – expects to see its revenue decrease unevenly throughout the year, making it harder to apply for the subsidy.
“Australia won’t be the first to act on such measures,” said Rebecca Schot-Guppy, GM of FinTech Australia. “We are suggesting steps that have been taken in the UK and Singapore. We welcome a robust discussion with the government on how to ensure fintech and other innovation industries contribute to Australia’s economic recovery and also create jobs for more Australians.”