The government has passed new laws to finally bring its much-discussed fintech regulatory sandbox into reality.
The Treasury Laws Amendment (2018 Measures No. 2) Bill 2019, passed on Monday evening, builds on the existing sandbox, expanding the time period fintechs can spend in it, as well as the scope of those that are allowed in.
Now, fintechs will be able to test products for 24 months without having to obtain a financial services or credit licence from the Australian Securities and Investments Commission (ASIC).
It’s intended to provide an environment helping fintechs get to market without having to tread quite so carefully through the regulatory minefield, thereby removing one of the major barriers to new entrants, and bringing more competition to the Australian financial landscape.
A release from Senator Jane Hume, Assistant Minister for Superannuation, Financial Services and Financial Technology, said there will be strong consumer protections in place, including limits on the products and services that can be tested, and limits on financial exposures of retail clients.
The current ASIC sandbox capability, introduced in 2016, allows for unregulated testing for 12 months, and is available only to startups working on specific products or services.
The amendment expands the remit to include businesses working on financial advice, the issuing of consumer credit contracts and facilitating crowdsourced funding.
“A strong fintech ecosystem means a more competitive financial market landscape — one that is consumer-driven, efficient and among the world’s leaders,” Hume said in the statement.
“As a mature, diverse and internationally connected ecosystem, Australia is an attractive destination for fintech investment globally. The Morrison government is seizing this valuable opportunity to grow the sector even further.”
It’s good news for Aussie fintech startups. But it’s been a long time coming.
ASIC’s original sandbox was hailed as “world-leading” and “potentially game-changing” by the startup community.
However, since then, the restrictions in place have reportedly meant only seven startups have been able to take advantage of it.
Even so, in late-2017, consumer advocacy groups raised concerns about the existence of a sandbox at all, and opposed any expansion of the legislation, saying it put consumers at risk.
In a group submission to the draft legislation at the time, Choice, Financial Rights Legal Centre and the Consumer Action Law Centre suggested an extended sandbox could allow for unlicensed financial advice on things such as superannuation, insurance and long-term investments.
“These services are too complex and too important to the long-term well-being of consumers to be offered without the adequate protections that the sandbox removes,” they said.
However, Danielle Szetho, chief of FinTech Australia, said at the time much of what fintech startups do is about providing better protections for consumers.
“Many fintechs I see are oriented completely around what the consumer is thinking, and some are turning around what it means to be customer-centric,” she told SmartCompany.
“They have thinking about the consumer completely at the core,” she said.
“It’s about maintaining the long-term integrity of the industry, and we agree there needs to be good safeguards against dodgy operators in place.”