Telstra shuts downs supplier payday lending arrangements with Greensill and Taulia

Telstra is no longer offering supply chain financing to its suppliers, two years after it launched the controversial payment method.

The telecommunications giant terminated its supply chain financing arrangements a month earlier than expected. Picture: William West/ AFP.

Telstra has weaned itself off supply chain financier Greensill which is on the verge of collapse, declaring “there is no financial risk” to the telco after it switched off the controversial payment platform.

Telstra, which had about $98m worth of outstanding invoices set to be paid via supply chain financing as of December 31, says it now expects that balance to be zero or close to it in coming months.

The telecommunications giant terminated its supply chain financing arrangements a month earlier than expected.

Telstra has spent the past week speaking with suppliers to ensure their invoices were up to date before its turned off the payments platform.

“We no longer offer our suppliers the option of supply chain financing. We continue to work with our suppliers to ensure their invoicing to us is up to date and they have the funds they need when they need them,” a Telstra spokesman said.

“There is no financial risk to Telstra, or our suppliers, from this situation. Suppliers’ invoices submitted to Telstra have been, and will continue to be, paid by their due date.”

Telstra began winding up its supply chain financing arrangements 12 months ago, after The Australian revealed it had partnered with Taulia, a company registered in the US state of Delaware, to create a new online payments portal, which involved suppliers taking a haircut to their bills if they wanted prompt payment.

When it launched the scheme in early 2019, Telstra extended its payment terms from 45 to 62 days from the end of the month the invoice was lodged — a period that effectively represented up to 90 days in some cases. The move was expected to boost Telstra’s bottom line by about $500m a year, according to a promotional video published on Taulia’s website.

But what suppliers didn’t know was that their business data, supplied while tendering for different projects, was being used for other purposes. Taulia negotiated discounts of behalf of Telstra and had a range of tools at its disposal — including big data and artificial intelligence — to calculate a supplier’s willingness to discount its invoices and how much of a financial hit it could take.

Following the revelations published in The Australian, Telstra introduced 20 payment terms for its small and medium-sized suppliers, which represented about 85 per cent of its total suppliers.

This effectively removed the need for supply chain financing and Telstra began a year-long process to remove the platform altogether, with the turn-off date scheduled for the end of this month.

There were some suppliers who requested access to supply chain financing arrangements at the start of the COVID-19 pandemic amid fears that access to capital would tighten.

But as fears of a credit crunch eased, the few remaining suppliers on supply chain financing contracts felt more comfortable exiting the platform, with Telstra officially turning it off last week.

Taulia still boasts some big clients, according to its website, including pharmaceutical giant AstraZeneca, which has developed the COVID-19 vaccine that most Australians will receive.

Taulia has AstraZeneca listed as its “featured case study” and said it helped the pharmaceutical major “release more than $1bn in trapped cash”.

“Taulia has allowed us to focus on reimagining sleep rather than dealing with the day-to-day transactional issues that would normally slow a business down,” AstraZeneca former working capital lead Andrew Wilson said on Taulia’s website.

Other clients include the UK National Health Service Business Services Authority (NHSBSA), which manages more than £35bn ($63bn) of NHS expenditure each year.

“Taulia had the knowledge and scale to make the early payment scheme a success. Most of all they shared our combined ambition to further improve the scheme which, as of today, pays out £91m a month,” NHSBSA director of primary care services Martin Kesall said on Taulia’s website.

The NHS was also a client of Greensill, with the firm’s founder Lex Greensill generating publicity in March last year when he announced he was giving the National Health Service free access to the scheme, available via its Earnd app.

Greensill acquired Earnd, an Australian fintech start-up, in early March, which, according to its website, does not affect an employee’s income level. “Earnd simply removes the reliance on a particular payday and allows you to access up to 50 per cent of your earned net income before payday,” the company said.

“What we have seen with the arrival of COVID-19, there is a need to help those frontline staff — the nurses, janitors, porters, doctors in our National Health Service who are protecting our country,” Mr Greensill told Sky News UK.

“We are working with more than half a dozen national health trusts across our country to ensure that frontline staff are able to get paid every day … completely for free — both free for employees and the NHS. In a way, it’s our free cup of tea.”

Mr Greensill also pitched his wages on demand offer to former Finance Minister Mathias Cormann at the sidelines of the World Economic Forum in Davos last year, but it wasn’t Mr Cormann’s cup of tea, with his department not pursuing the pitch or making further inquiries.

In a briefing document prepared before the Davos meeting, Mr Cormann’s department said Greensill’s wages on demand offering was “economically similar to payday lending”.

“Except that the financing and administration costs are met by the employer and not the employee and — at the end of each pay cycle — the employer would be responsible for repayment direct to the lender,” the briefing note said.

Mr Greensill has since dismissed this description of his service.

“The person (the bureaucrat) who wrote it was simply wrong,” Mr Greensill told The Australian in December.

“When we bought Earnd in Australia, for example, the next day we waived all of the fees that had been commercially negotiated for employees to pay and we made it free for everybody. I’m not sure how being able to be paid for free every day is economically similar to payday lending. People make mistakes, I guess.”