Assistant minister for superannuation, financial services and financial technology Jane Hume made the comments while speaking to Stone & Chalk chief executive Alex Scandurra, during a webinar for the incubator’s members.
Fintechs will be part of the recovery and “new economy” post-COVID-19, the senator stated, but she acknowledged that many businesses in the sector will be facing difficulties during the crisis.
“We know that the ecosystem is feeling the pressure acutely. We have problems of lower availability of capital,” Senator Hume said.
“You guys have short runways, there’s been falling demand and I know that you’ve been making some really difficult decisions in the past few weeks and we think that’s probably going to continue for some time.”
While the $130 billion JobKeeper package will be available to a number of fintechs, some will not qualify, Ms Hume noted, as start-ups that are pre-revenue. Other measures, such as the PAYG cash flow boost of up to $20,000 and instant asset write-off, may apply.
She noted post-pandemic, the government will be picking up its prior focus on providing incentives for capital and private sector investment.
Polling the audience, Mr Scandurra noted about half of the watchers were either a start-up or scale-up and out of those, about 60 per cent potentially qualified for JobKeeper payments from the government, 22 per cent did not and 15 per cent were unsure.
About half of the viewing fintechs reported they had customer deals fall through in the last two months, from the onset of the COVID-19 shock.
About 23 per cent of fintechs had seen investment deals stop and another 38 per cent had seen their deals in jeopardy, with only 2 per cent reporting they were unaffected. Roughly two-fifths answered not applicable.
Further, Mr Scandurra noted fintechs are set to be affected by large organisations implementing cost control measures, including the cutting down of services.
“We’ve found that anywhere between 70 to 80-odd per cent of fintechs are enterprise solutions, or they’re working through enterprises channel partners to get to market. And what that means is for their survival they need to have large organisations typically be their customers,” he said.
“So what that says is that for the majority of start-ups and scale-ups, whether they’re pre- or post-revenue, survival is potentially going to depend on their ability to attract capital, to help them bridge what’s going to be an extended gap in terms of being able to get customer revenue through the door.”
In response, Senator Hume noted the government will be looking to its overseas counterparts for examples of incentives, grants and cashflow assistance, as well as hinting the federal budget may present opportunities.
“I think that we need to look to our international counterparts and see what it is that they’re doing and making sure that we remain competitive because clearly, note this is very fluid market, it can go anywhere in the globe,” she said.
“It’s really important that innovation hubs like [Stone & Chalk] remain strong in this crisis. We want to maintain the skills pipeline, because that will be short supply inevitably.
“I would keep an eye out for the October budget. I think that that is going to be an opportunity for us to... lay those foundation stones for a more efficient and free-flowing economy that we are going to need… to come out of this crisis.”
Australia an ‘ideal testbed’ for Asian fintechs
The government is looking to extend its international links after forming the UK-Australia FinTech Bridge, a framework allowing for ongoing cooperation between the two nations on industry policy and regulation.
Senator Hume said next on the agenda is broadening the UK agreement, as well as extending to other nations. In particular, the government is looking towards Singapore, being set to continue discussions with local ministers and regulators and promoting investment in Australia.
“I think what I noticed when I went to Singapore last year was how interested they were in the Australian fintech ecosystem, how they can see that we’re an ideal testbed… for Asian fintechs who want to enter Western markets,” she said.
“We are very digitally and financially literate. And we have excellent financial inclusion – nearly 100 per cent [of the] population is banked and we have quite similar demographics to Western Europe and also to North America.
“The Singaporean sector is such an invaluable source of capital and skills for Australian firms and there really is no shortage of demand for Australian expertise in that market, too.”
Senator Hume noted the Australian fintech industry is “perfectly poised to become a leading export growth sector”.
“It is such a globally focused ecosystem here in Australia… over 40 per cent of Australian fintechs already have an international presence of some sort,” she said.
Senator Hume added the government will be pressing on with implementing the consumer data right (CDR) legislation (open banking), commenting it was on track to be launched on 1 July.
The CDR 2.0 enquiry has been extended until 21 May, with the assistant minister pushing for industry submissions.
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
Sarah has a dual bachelor's degree in science and journalism from the University of Queensland.