ASIC’s provides class waiver and regulatory sandbox for Fintech start-ups

 

  • ASIC release a class waiver for eligible Fintechs to test services 

  • No requirement to have Australian Financial Services or Credit Licences 

  • Entitlement can be relied on for 12 months

  • Limited to 100 retail clients

  • Required to meet specific consumer protection and dispute resolution criteria

  • Additional regulatory sandbox provides for tailored exemptions

Sources: Hall & Willcox; Finextra

 

Summary: ASIC are looking to promote Fintech innovation, releasing a class waiver for any eligible businesses to be exempt from regulations and a regulatory sandbox to tailor regulatory exemptions to specific enterprises. These exemptions allow innovators to test and build their businesses with limited regulatory overhead. With sandboxing, this is likely to be while the enterprise works towards meeting the full regulatory approvals process.

 

 

Point of View

Following the consultation published in June 2016, ASIC has released two regulatory instruments that allow eligible businesses to test products and services: ASIC Corporations (Concept Validation Licensing Exemption) Instrument 2016/1175 and ASIC Credit (Concept Validation Licensing Exemption) Instrument 2016/1176.

 

These make available a class waiver and tailored exemptions for Fintech licensing. The class waiver provides exemption without an application process, for specific types of businesses, including: dealing in listed Australian securities, simple managed investments, deposits, some insurance products, and payments products from deposit taking institutions. The tailored licensing exemptions, available on application, allow approved Fintechs to test services. This tailored approach is equivalent to “regulatory sandbox” in other markets.

 

The regulators in other markets, such as the UK and Singapore, have implemented a regulatory sandbox to encourage Fintech innovation and market development. However, the concept of the class waiver, legally applicable, without an application process, is believed to be unique to Australia.

 

 

Implications

While the class waiver allows specific payment services (such as stored value) to avoid full regulation, for the tailored exemptions, with the limitations allowed in the regulatory sandbox, it is not necessarily obvious the benefits available for testing payment services using ‘real’ users. This is illustrated in the UK experience, where only a small number of approved Fintech service providers were testing payments services, while the majority were related to investment and insurance services.

 

However, it is positive that the regulator is encouraging innovation by allowing testing of services without a lengthy compliance process. The sandbox allows innovators to continue to test and build their businesses while working towards meeting the full regulatory approvals process.

 

 

The opinions and views expressed in this publication are those of the authors exclusively and do not purport to reflect the opinions, views or official policy position of AusPayNet or its members.

 

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