The Australian Securities and Investments Commissions (ASIC) in a move to support fintech startups announced “licensing exemption” along with a regulatory guide which will include information on Australia’s regulatory sandbox for early-stage fintech startups. The initiative aims to help reduce the barriers for innovative products and services to enter the financial market by making the process simpler for the fintech firms to validate and refine concepts before the expensive licensing process.

This exemption will allow the startups to start testing without having to go through the application process for a licence. They only need to notify the regulator that they plan to start testing a service and meet certain criteria. ASIC commissioner John Price said in a statement,

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

The process and benefits

The process will be able to notify ASIC after meeting certain consumer protection conditions that they are using the sandbox instead of going through a costly and time taking approval process. They can test the trial specified services entailing for up to 12 months with a maximum of 100 retail customers. There is no limit on the number of wholesale clients and the total customer exposure must not exceed $5 million.

The firms must have adequate compensation and dispute resolution arrangements for retail clients. The ones offering advice or dealing in and distributing products but haven’t issued themselves are eligible for the exemption. While those that lend money to consumers or startups that operate their own managed investment schemes like marketplace lending platforms cannot utilize the services. Also, testing under exemption must meet the following conditions –

  1. Retail client exposure must be no greater than $10,000 for services related to deposit products, simple managed investment schemes, securities and payment products;
  2. Services related to credit under a credit contract must not exceed $25,000; and
  3. Fintech offering insurance services must not insure more than $50,000 per contract.
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