ASIC has released a consultation paper and a review of its regulatory sandbox, introduced in December 2016.
In the review ASIC proposes to retain class waivers known as the fintech licensing exemption, that allow eligible financial technology (fintech) businesses to test certain specified services without holding an Australian financial services or credit licence for up to 12 months. The exemption is subject to a number of conditions, such as client and exposure limits, consumer protection measures, adequate compensation arrangements, and dispute resolution systems.
The fintech licensing exemption is a world-first approach that allows eligible fintech businesses to test certain services for up to 12 months without an AFS or credit licence.
Outside of the fintech licensing exemption, many fintech businesses rely on exemptions provided under ASIC’s relief powers. They have provided a number of exemptions from the licensing requirement for offering certain types of products and services. This is because, depending on the nature, scale and complexity of the products and services offered, it is not always appropriate for a business to obtain a licence and meet all of the usual regulatory obligations. They have provided relief for ‘low value’ non-cash payment facilities, the provision of generic financial calculators, and some services for mortgage offset accounts.
ASIC had committed to reviewing its fintech licensing exemption following 12-18 months’ operation.
ASIC Commissioner John Price said, ‘by introducing ASIC’s fintech licensing exemption,we have given a range of fintech businesses the chance to test their ideas without needing a licence.’
‘Even in cases where interested fintechs have discovered that they were not able to make use of the fintech licensing exemption, we have found that its introduction has encouraged businesses to come forward and consider their other options that result from the flexibility in ASIC’s existing regime.’
ASIC’s current fintech licensing exemption allows eligible businesses to test specified services for up to 12 months with up to 100 retail clients, provided they also meet certain consumer protection conditions and notify ASIC before they commence the business.
To date, four fintech businesses have used the fintech licensing exemption. Relying on the exemption, one business tested its financial services (providing advice and dealing in listed Australian securities); two businesses are currently testing advisory and dealing services in deposit products; and one business is testing acting as an intermediary and providing credit assistance.
In addition, over a dozen fintech businesses have also contacted ASIC about using the fintech licensing exemption.The consultation period closes on 27 February 2018.
ASIC also launched their Innovation Hub in 2015, and has worked with 233 fintech businesses that cover the spectrum of fintech.