FinTech Australia have flagged their support for the Federal Government’s proposed legislative changes to the fintech regulatory sandbox but called for further improvements to make the sandbox more robust and fintech-friendly.
Earlier this month, FinTech Australia’s chair Stuart Stoyan gave evidence to the Senate Economics Legislation Committee, which is inquiring into the provisions of the Treasury Laws Amendment (2018 Measures No. 2) Bill 2018.
As originally introduced by ASIC in December 2016, Australia’s fintech sandbox included a class waiver to allow eligible fintech businesses the near-automatic right to test a limited number of services for up to 12 months without an Australian financial services or credit licence.
The bill takes a new approach, by allowing the Australian Treasurer to make regulations to deliver an expanded sandbox environment. This differs from the current approach, where ASIC delivers the sandbox through its own processes.
In his opening statement handed to the Senators, Stoyan noted that the 2017 EY Fintech Census identified that 78% of fintechs believe an expanded and more flexible regulatory sandbox environment is required. He also noted that the response to the current sandbox had been disappointing in that only five fintechs had used it.
In evidence to the committee, Stoyan said that “the construct of the original sandbox that was excessively rigid in its approach.”
Although Stoyan said he supported the Government’s proposed bill, he argued in favour of a series of changes to the proposed regulation which will accompany the bill, along with strengthening ASIC’s resourcing to make the sandbox more successful. Specifically, he advocated in favour of:
- Increasing the breadth of products that could be tested in the sandbox, including safe and established retail client products and fintechs acting as agents acting for authorised product providers (which will be particularly helpful for insurtechs).
- Ensuring only genuinely innovative new businesses can enter the sandbox, through an appropriate ASIC filtering process
- Improved oversight and monitoring of fintechs while in the sandbox by ASIC, to allow these fintechs to receive the benefit of ASIC guidance and support
- Changes to the relevant investment and other limits applicable to these products proposed under the bill’s supporting regulations, to make these limits more workable.
“Having an official review, or a screen, is definitely something that we would be supportive of, to ensure that only appropriate companies or businesses were able to enter the sandbox, but having some ongoing oversight of the sandbox is also important,” Stoyan said.
Stoyan told the hearing the experience of his own company, marketplace lender MoneyPlace, which took over 18 months to gain regulatory approval from ASIC also demonstrated a need for a robust sandbox.
“During this time we spent a considerable amount of time and resources gaining a licence which arguably could have been better spent refining our technology and business model,” Mr Stoyan said.
“We could have provided benefits to our customers much earlier if a regulatory sandbox existed at the time, but we were alone in this experience, fintechs such as Clover and RateSetter also experienced delays in gaining regulatory approval.”
The government’s bill also provides new consumer safeguards, including empowering ASIC to apply to the court to apply for a fintech to meet one of its conditions and giving ASIC the ability to make decisions as to how an exemption starts or ceases to apply to a person or group of people.
The government is intending to expand the sandbox testing environment from 12 to 24 months and expand the type of products which can be tested, including into superannuation and insurance.