ASIC to boost innovation in financial services, rolls out licensing exemption for fintech companies

The Australian Securities and Investment Commission (ASIC) has released class waivers to foster fintech innovation in the country.

The class waivers will enable eligible fintech businesses to test certain specified services without holding an Australian financial services or credit licence. According to the official announcement, the fintech licensing exemption will allow 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.

“ASIC’s 'fintech licensing exemption' is unique. No other major jurisdiction has implemented a class waiver which allows eligible businesses to notify the regulator and then commence testing without an individual application process”, ASIC Commissioner John Price said. “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 fintech licensing exemption was initially proposed in Consultation Paper 260 ‘Further measures to facilitate innovation in financial services’ (CP 260). ASIC amended the proposal taking into consideration the feedback received, including extending the testing period and expanding the products in relation to which services can be tested.

ASIC has released Regulatory Guide 257 ‘Testing fintech products and services without holding an AFS or credit licence’ (RG 257), which contains information about Australia's 'regulatory sandbox' framework. The regulatory guidance explains the options available for testing without a licence.

“ASIC’s fintech licensing exemption reflects our commitment to facilitating innovation in financial services. However, we are equally committed to ensuring that innovative products and services are regulated appropriately and promote good consumer outcomes”, Price said.

ASIC said that businesses that are not eligible for the fintech licensing exemption can seek an individual exemption. The policy on exemptions is available in Regulatory Guide 51 ‘Applications for relief’ (RG 51).

Moreover, ASIC has also released updated guidance to licensees on satisfying the requirements to maintain competence in Regulatory Guide 105 ‘Licensing: Organisational competence’ (RG 105) and Regulatory Guide 206 ‘Credit licensing - Competence and training’ (RG 206). These updates are also based on feedback received to proposals in CP 260.

“These are important updates to our licensing regime which take into account the circumstances of new innovative businesses and facilitate these businesses to meet the organisational competence requirements in alternative ways”, Price said.