Published on the 13/06/2016 | Written by Beverley Head
The Australian Securities and Investment Commission has outlined its plans to allow local fintechs to test a new product without the need for a financial services licence…
As part of a broader national push to allow Australian fintechs to flourish without being overwhelmed by regulatory red tape, ASIC has been charged with managing a start up friendly regime. It has already established an Innovation Hub through which fintech start-ups can interact with the organisation, and it released a consultation paper last week which outlines its plans for a regulatory sandbox.
In a presentation to Melbourne start ups last week ASIC Commissioner John Price and the head of the innovation hub Mark Adams acknowledged that the barriers for fintech start ups included the speed to market if they were locked up attempting to get a full licence; their organisational competence with regarding navigating regulatory and legal frameworks; and access to capital which meant funding licence applications could be a challenge.
While it wants to offer a more start up friendly regime, it still sees one of its primary functions as protecting consumers and investors while promoting market efficiency.
As part of that ASIC has indicated it will be more transparent about how it currently assesses licence applications, and also allow some highly automated businesses to rely on a compliance signoff from a professional third party – rather than ASIC – in return for a limited licence.
Finally – and perhaps most importantly – it has outlined its plans for a fintech sandbox. While fintech startups still need to apply for a licence, they will be allowed to test certain financial systems for up to six months while they work toward getting a licence.
The consultation period regarding the proposals lasts until 22 July.
Commissioner Price said; “We believe the measures proposed in this consultation paper will help to lower barriers to entry faced by fintech start-ups by providing cost reductions and promoting efficiency in the provision of financial services whilst maintaining the fundamental principles of the regulatory and licensing framework.
“The proposed licensing exemption compares favourably to measures in other jurisdictions as it will allow some fintech businesses to commence testing of certain product offerings in the absence of detailed assessment by the regulator.”
In a Fintech Australia blog, Andrew Lai, founder of Fintech Melbourne and FinancialAsk described the plans as a “game changer” for the sector.
“Most early stage companies face a Catch-22 situation when starting up. They require funding to gain an AFSL (Australian Financial Services Licence) yet are unable to prove their business models because they do not have one.”
He noted that in the past it has taken some fintechs up to two years to get an AFSL.
While Lai acknowledged that not every start up would succeed, he believed that it would allow more fintechs to flourish than under the previous regime.
