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Thursday 15 December 2016

16-440MR ASIC releases world-first licensing exemption for fintech businesses

ASIC has today released class waivers to allow eligible financial technology (fintech) businesses to test certain specified services without holding an Australian financial services or credit licence.

ASIC Commissioner John Price said, '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 has also 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.

That framework is comprised of:

  • existing flexibility in the regulatory framework or exemptions already provided by the law or ASIC which mean that a licence is not required. Examples include existing ASIC relief for non-cash payment products like stored value cards and regulations meaning that a licence is often not required for certain foreign exchange services;
  • ASIC’s fintech licensing exemption provided under ASIC Corporations (Concept Validation Licensing Exemption) Instrument 2016/1175 and ASIC Credit (Concept Validation Licensing Exemption) Instrument 2016/1176
  • tailored, individual licensing exemptions from ASIC to facilitate product or service testing - individual exemptions of this nature are similar to the 'regulatory sandbox' frameworks established by financial services regulators in other jurisdictions.

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.'

Fintech licensing exemption

ASIC’s fintech licensing exemption allows 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 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,' Mr Price said.

The fintech licensing exemption was initially proposed in Consultation Paper 260 Further measures to facilitate innovation in financial services (CP 260). ASIC has amended its proposal in light of the feedback received, including extending the testing period and expanding the products in relation to which services can be tested.

Information about the services covered by the fintech licensing exemption, is available in an ASIC infographic, as well as in RG 257.

Businesses that are not eligible for the fintech licensing exemption are able to seek an individual exemption. ASIC’s policy on exemptions is available in Regulatory Guide 51 Applications for relief (RG 51).

'Individual applications are an important part of Australia’s regulatory sandbox framework,' Mr Price said. 'For instance, this option is open to existing licensees who wish to test an innovative product or service and comply with a modified version of the law.'

Other measures to facilitate innovation

ASIC has today 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.

The updated guidance in RG 105 provides greater flexibility for some ‘small-scale, heavily automated businesses’ seeking to nominate a responsible manager. These businesses may now nominate a responsible manager without day-to-day involvement in the business to provide regular sign-off on the licensee's processes and systems and the quality of financial services provided.

RG 105 has also been updated to include six examples to help illustrate the how we assess submissions about a responsible manager's knowledge and skills under Option 5 of RG 105.

Mr Price said, '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.'



In June 2016 ASIC released Consultation Paper 260 Further measures to facilitate innovation in financial services, which outlined ASIC’s proposals to: 

  • provide examples on how ASIC exercises its discretion under existing policy to assess the organisational competence of a licence applicant
  • modify ASIC's policy on organisational competence of a licensee to allow some limited-in-scale, heavily automated businesses to rely, in part, on compliance sign-off from a professional third party to meet their organisational competence requirements, and
  • implement a limited industry-wide licensing exemption to allow start-ups to test certain financial services for six months.

ASIC received 29 submissions in response to CP 260; ASIC thanks the people, businesses and associations that took the time to provide comments on our proposals. Based on the feedback received to CP 260, ASIC has created the fintech licensing exemption, released RG 257 and updated RG 105 and RG 206 to facilitate innovative products and services.

Information on the feedback ASIC received to CP 260 is available in Report 508 Response to submissions on CP 260 Further measures to facilitate innovation in financial services.

Last updated: 30/03/2021 09:33