A broader range of FinTechs will be able to access the regulatory sandbox for twice the length of time after legislation was finally passed by Parliament, nearly two-and-a-half years after it was first announced by the government.
The regulatory sandbox, which lets FinTech companies test products and services with real customers without having to obtain the usual financial services licence, has been used by just seven companies since it was first launched more than three years ago.
The legislation, passed by the Senate on Monday night, significantly expands the sandbox, allowing for a broader range of FinTechs to access it and doubling the length of the licence exemption to two years.
The legislation was passed unamended, with Labor’s attempts to include a more stringent innovation test in the legislation voted down. The sandbox was criticised by the Greens, with concerns it could become “kitty litter for spivs”.
The new and improved sandbox will help local FinTechs compete on a global level, Economics Legislation Committee chair and Liberal Senator Slade Brockman said.
“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.
“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.”
Labor had attempted to amend the legislation to require a company looking to enter the regulatory sandbox to submit a notice outlining details of its product or service and giving a “sound and fulsome” justification for why they need the licencing exemption.
It would have also given ASIC the power to remove a company from the sandbox if they are not satisfied with the justification.
“This bill should not be a green light for wannabe con artists who want to get their hands on Australian people’s money through technology that is not properly contained and regulated to a degree that gives people safety and certainty in their interaction with it. There should be relevant protections,” Labor Senator Deborah O’Neill said.
“If a company or entity wishes to suspend consumer protection laws, they should provide a crystal-clear and ironclad reason for doing so, and that reason must clearly meet the public interest test,” she said.
“We need to send a message: you can’t just use this as a fast track to get around all the rules and regulations that protect Australian consumers.”
These amendments were rejected by the Coalition and voted down by the Senate, before the legislation was passed unamended.
“The role of regulation is not to lock Australians in a white room with no doors. The role of regulation is to manage risk and to balance – and allow people to balance – risk against potential rewards,” Senator Brockman said.
“People need to go into these kinds of new products with their eyes wide open. They need to understand what they are doing. But there is an inherent level of risk in something that is new. The only way of having no risk is to lock yourself in a white room with no doors. That is not what the Australian people have shown they want to do.”
The entire concept of a regulatory sandbox was slammed by Greens’ Treasury spokesperson Peter Whish-Wilson, who said it would “deregulate financial markets and increase risk for investors and consumers”.
“Have we learnt nothing? A regulatory sandbox, providing a more flexible environment for entrepreneurs to develop sophisticated financial products. You know what that spells to me? One word: risk. These kinds of initiatives will be like burley to sharks,” Senator Whish-Wilson said.
“Why are we making it easier for this industry and for potential spivs coming into this industry to rip off more Australians,” he said. “One thing we’ve learnt from the Royal Commission is that, if we’re to protect consumers and protect investors, we need a better regulated financial industry.
“We don’t need more loopholes that allow disreputable operators to operate in this kind of high-tech, highly complex environment.”