The government’s JobKeeper wage subsidy scheme has “failed” early-stage pre-revenue tech companies, with more support needed following the September cut-off, a Parliamentary inquiry has heard.
The Select Committee on Financial Technology and Regulatory Technology held a public hearing on Tuesday focused on RegTech and the impact of COVID-19.
The inquiry was told that many high-growth early-stage companies had been locked out of much of the government support put in place to help businesses survive the ongoing crisis, and that FinTechs have had “even less of a seat at the table” with the government this year.
Australian Small Business Ombudsman Kate Carnell confirmed that many startups and early-stage firms have been unable to access JobKeeper.
“Where JobKeeper failed – and we’ve made this clear publicly before – was in fast-growth startups in this space that had yet to sell product,” Ms Carnell told the hearing.
“They were growing really quickly, they were growing the business and growing their offering, but had not yet signed a contract or been paid. Of course, they weren’t just in at all.”
While a number of groups successfully lobbied the government to alter the scheme to allow for more startups to access the wage subsidy, many still missed out.
According to a survey conducted by the RegTech Association, an “astounding” 40 per cent of respondents were unable to access JobKeeper or any other form of support, and 16 per cent had seen “some retraction in potential capital flow” as a result of the pandemic.
“Definitely an early-stage startup without revenue was not going to qualify for it,” RegTech Association chief executive Deborah Young told the hearing.
“I think it was important for us to get that expanded so that high-growth companies were included, but there is still a great deal of uncertainty out there as to what will happen … we’ve just got to survive this year,” she said.
“They are hoping that it will be extended, yes, because the real economic impact of the pandemic hasn’t even really hit us yet. There are some challenging times to come.”
The FinTech sector has had little access to the federal government during the crisis to discuss the types of support companies need, with AgriDigital chief executive Emma Weston saying that the sector has had even less of a seat at the table with government than usual.
“A greater ability to liaise with government in the same way that the traditional sector does, whether that is through FinTech Australia or there is a broader outreach to the FinTech sector, in order to bring them into the tent,” Ms Weston told the hearing.
“To be frank, we’re just not involved in that conversation at all and yet we are funding a significant number of businesses that are not able to access traditional funding, but are wanting to feel that the funding they are accessing is credible.
“I certainly think that somehow being able to get a seat at the table would be very useful so that there are opportunities to look at where the FinTech industry can clearly provide solutions that the banks are not prepared or not able to provide.”
The federal government should also look to open procurement to local RegTech companies, Ms Carnell said.
“One of the things government could do really well to help things along in the sector is actually go out to tender, using their purchasing power to get some RegTech solutions happening,” she said.
“There is a whole range of areas in government where that could be a great benefit certainly to small business and more broadly. That is, in our view, a time when government purchasing power really needs to be used to stimulate the economy.
“It’s a sector that has the potential to grow to add to our export capacity. But, to simplify the complex regulatory framework we operate in Australia, what a great win-win outcome it would be if government could use its purchasing power for that purpose.”