A greatly expanded regulatory sandbox for FinTech companies is set to be launched in September, nearly three years after it was first announced by the federal government.
Legislation widening the scope of the ASIC regulatory sandbox, which lets companies test financial or credit services with real people in a controlled environment without first obtaining the necessary licences, was passed by Parliament in February.
The government is working to finalise the regulations around the new sandbox, which is set to be launched at the start of September, Treasury said in a submission to a parliament inquiry into the FinTech sector.
The changes, first announced by the Coalition in October 2017, allows for a broader range of FinTechs to access the exemptions, and doubles the length of the licence exemption from one year to two years.
“The enhancements will allow FinTechs to test specified financial services including financial advice, the issuing of consumer credit contracts and facilitating crowd-sourced funding for 24 months without obtaining a financial services licence or a credit licence from ASIC,” Treasury said.
The expansion comes after the existing regulatory sandbox, launched in late 2016, has proved to be a disappointment, with very low levels of engagement. Only seven companies have accessed the sandbox since it launched three-and-a-half years ago, with more than 40 other firms applying for it but proving to be ineligible.
In a separate submission to the inquiry in April, ASIC said the sandbox would be launched three months after the regulations were finalised.
“In the meantime, ASIC is developing its approach to administering the Enhanced Regulatory Sandbox (ERS) including the provision of guidance to businesses about how the ERS operates and what is expected of firms that intend to make use of the ERS,” the submission said.
“ASIC has recently received some early interest and enquiries in relation to the ERS.”
Legislation expanding the regulatory sandbox was first introduced to Parliament in February 2018, but wasn’t passed for another two years. In that time, only four companies accessed the existing licencing exemptions.
While supporting the legislation, Labor attempted to move amendments requiring a company to submit a notice outlining details of its product or service and giving a “sound and fulsome’ justification for why they needed the exemption, with ASIC given the power to kick a company out of the sandbox if it was not satisfied.
These suggestions were knocked back by the government and the legislation was passed unamended.
Economics Legislation Committee chair and Liberal Senator Slade Brockman said the enhanced regulatory sandbox would help to make local FinTechs more competitive globally.
“Giving Australian companies and Australian entrepreneurs the maximum opportunity to develop ideas within the safe-harbour provisions of the sandbox, the innovation precinct of the sandbox gives Australian companies that opportunity to compete with other nations,” Senator Brockman said in February.
“We want people to be able to ‘trial and error’ these kinds of products in a safe environment to help them to work out what works, what doesn’t and what is to be released more widely, and then to gain access to a financial services or credit licence.”