Troubled fintech Tyro has halted trading: What’s going on? And should small business owners be worried?

Beleaguered fintech Tyro is seeing no improvement to its 2021 so far.

On Friday, the ASX-listed fintech called a halt to trading after short selling group Viceroy Research alleged its tech outage is more far-reaching than first thought, and — worse — that Tyro actually has no idea just how bad things are.

So, what’s going on here? And should Tyro’s small business customers be concerned?

What’s happened?

This latest debacle comes amid an ongoing service outage at Tyro, which has prevented its small business customers from being able to accept card payments.

Last week, it was revealed that up to 10,000 eftpos terminals were down, now for well over a week.

Viceroy’s report alleges that as many as half of Tyro’s terminals have been ‘bricked’.

Initially, the fintech said less than 15% of terminals and 5% of sales volumes were affected. Later it updated this estimate to 30%.

“It seems that Tyro has no idea — and no way to determine – how many of its terminals are actually functional,” Viceroy’s report reads.

It also alleged that many affected customers have had no communication from Tyro yet.

Throughout this tech outage, Tyro has “singled itself out as the most unreliable and technologically inferior fintech in Australia”, the report added.

Essentially, Viceroy’s report concludes that Tyro is likely to “significantly decline” in this quarter.

“Given the poor visibility into the company’s response, the market’s reaction, and low cost of exit for customers we are unable to quantify the impact this will have on the company’s share price.”

This caused shareholders to start offloading their stock, driving the fintech’s share price down significantly.

The report was released at 11am on Friday. Within an hour, Tyro’s share price had plummeted by almost 12%.

A trading halt was called, meaning shares cannot be bought or sold until Tuesday morning.

What is Viceroy Research?

Describing itself only as ‘a group of individuals who see the world differently’, Viceroy is a somewhat mysterious short selling group, unmasked in 2018 by the Australian Financial Review as Melbournites Gabe Bernarde and Aidan Lau, and Fraser Perring, a former social worker based in the UK.

Last year, the group released a similar report targeting logistics WiseTech Global, saying it was creating “fake value” through non-material acquisitions. That reportedly caused WiseTech’s valuation to drop by $2 billion.

The team has also targetted the likes of Syrah Resources and Quintis.

What are the claims?

Viceroy’s main assertion seems to be that significantly more Tyro terminals have been affected by this outage than it has reported.

It also says many of those customers have not yet been contacted by Tyro, suggesting that the fintech does not actually know the full extent of the issue.

The report also called into question Tyro’s assertion that faulty terminals will be collected and replaced within two to four days. ‘Experts’ have said three to five days would be feasible for businesses in metropolitan areas, it states.

And, given that Tyro’s courier partner is relatively small player Amtrak, an Australia-wide operation could take weeks.

Finally, the report claims that Westfield gift cards are currently not functional at any terminals. These cards are loaded on Tyro machines, it says, further calling into question the extent of the tech issues.

What is short selling anyway?

Short selling is an investment practice on the up in Australia, which sees investors borrowing a stock and selling it, with a view to buying it back at a lower price, thereby making a profit.

It’s a legitimate and legal activity. However, aggressive short selling in Australia is reportedly on the up. There are claims of large research houses issuing highly damaging reports, designed to impart maximum damage,

According to this comprehensive report from The Age and Sydney Morning Herald, some critics say such actors have been able to take advantage of cracks in Australian regulation.

What can Tyro do about it?

A Tyro spokesperson confirmed Tyro will issue an update on the outage on Monday, along with a response to the Viceroy report, and what chief executive Robbie Cooke called “the false assertions” made within it.

“Our focus remains getting all our impacted merchants back up and running as soon as possible and we are making strong progress in returning functioning terminals to our customers,” Cooke said.

Should Tyro customers be worried?

According to Stacey Price, founder of Healthy Business Finances, business owners that have Tyro as their only payment option should not sit around waiting for a solution to this outage.

“If customers can’t pay, you lose them,” she tells SmartCompany.

“Not just once, but potentially long term even though the payment issue is not your direct fault.”

Tyro’s fees are competitive, particularly when compared to big-bank solutions, she notes, but she strongly recommends having a backup plan, as well.

In fact, that goes for whichever provider you’re using. If one system goes down, you want to have another way for them to pay by card available immediately, she says.

“Some of these options take 24/48 hours to activate, so be proactive,” she advises.

As it stands, Price wouldn’t necessarily advise small business owners to switch from Tyro.

But she does think they should take heed, and use this opportunity to take a look at the fees, reliability and ease of use of their payments systems.

“I think it is a perfect reason for business owners to do a thorough analysis of their systems, their fees and if they are getting the best deal,” she says.