Corporate watchdog to launch fintech ‘sandbox’

The Australian 12:00AM December 16, 2016

Richard Gluyas

ASIC has released guidance for a “world first” regulatory sandbox where fintech companies can notify the regulator and start testing their products and services without making an individual licence application.

Commissioner John Price said yesterday that the fintech licensing exemption was unique, with no other major jurisdiction having implemented a system involving a class waiver.

“Fintech and start-up businesses now have more pathways than ever to begin testing the viability of innovative financial services and credit services for customers, before incurring many of the regulatory costs normally associated with running their business,” Mr Price said.

“ASIC’s fintech licensing exemption reflects our commitment to facilitating innovation in financial services. However, we are equally committed to ensuring that innovative products and services are regulated appropriately and promote good consumer outcomes.”

The policy, which was foreshadowed in The Australian yesterday, enables eligible businesses to test specified services for up to 12 months with a maximum of 100 retail clients.

The businesses must meet certain consumer protection conditions, such as professional indemnity insurance, and notify ASIC before they start up.

Ineligible businesses are able to seek an individual exemption.

Among the businesses that qualify for the exemption are those providing advice or dealing in or distributing products.

Other services don’t make the cut, such as lending money to consumers, operating a managed investment scheme like a marketplace lending platform, and businesses that issue their own products.

Businesses providing advice or distribution of products also qualify for the exemption. This includes deposit products with a maximum balance of $10,000, and payment products if they’re issued by a bank and have a maximum $10,000 balance.

Also included is general insurance for personal property and home contents with a maximum of $50,000 insured, and liquid investments for Australian securities or simple schemes with a maximum exposure of $10,000.

Finally, businesses offering consumer credit contracts with certain features, and a loan size of between $2001 and $25,000, can use the new framework.

ASIC released a consultation paper in June on further measures to help foster innovation in financial services. It received 29 submissions.

As a result of the new guidance, start-ups have a number of options to fulfil regulatory requirements. They can get a licence from ASIC if they demonstrate their “responsible managers” have the knowledge and skills to manage the business, or they can operate as a representative of a licensee if they have authority to operate that way. Finally, they can operate under ASIC relief from the law.