Home / It’s lonely in the sandbox but ASIC plays nicely

It’s lonely in the sandbox but ASIC plays nicely

ASIC has fast-tracked licensing for 33 fintech entities under its two-year old ‘Innovation Hub’ program, a report issued last week reveals. But there is still only one player actually in the ‘sandbox’.

According to the ASIC report, the Innovation Hub – launched in March 2015 to streamline licensing for fintech firms – had dealt with 168 entities as at May 2016 with 33 earning new Australian Financial Services or credit licenses out of the process.

“To date, new fintech businesses who have engaged with the Innovation Hub before submitting their application for a licence are receiving approval materially faster than those who have not engaged with the hub,” the ASIC report says.

  • The 168 fintech candidates included 35 digital advice offerings, 34 peer-to-peer lenders, 24 consumer credit tools, 21 payment and remittance systems, and 15 crowd-sourced equity funding firms. A further 39 groups covered a melange of activities such as insurance, superannuation, and managed investments.

    However, ASIC’s ‘sandbox’ arrangement – where promising fintech providers can operate unlicensed for up to 12 months – has only allowed entry to one player as at May this year.

    The ASIC ‘sandbox’ was approved last December as a way for eligible fintech firms to overcome traditional barriers to entry by accelerating product development, building organisational competence and reducing testing costs.

    “This is a ‘whitelist’ approach as there is no ASIC review of each proposed test. By contrast, regulatory sandbox proposals in other jurisdictions have involved the regulator selecting applicants and negotiating individual terms for testing fintech products and services,” the ASIC paper says. “We are also the only regulator to allow an automatic fintech licensing exemption for a defined set of products and limited time period.”

    The Financial Markets Authority (FMA), has explicitly ruled out the sandbox method for the NZ fintech community in favour of an organisation-wide ‘flexible’ approach to innovation.

    However, the FMA plans to consult this month on proposals to ease the introduction of ‘robo-advice’ solutions into the NZ market prior to impending legislative reform set to remove the ‘natural person’ barrier to providing financial advice.

    In the report, ASIC also outlines its planned approach to the ‘regtech’ sector – the burgeoning industry of technology providers touting ‘seamless’ solutions to the ever-growing regulation of financial services globally.

    “Specifically, ASIC believes regulatory technology can help organisations build a culture of compliance, identify learning opportunities, and save time and money on regulatory matters while improving compliance and outcomes for consumers,” the report says.

    The Australian regulator’s regtech plan includes creating a new industry liaison group to meet three-times a year, “continuing future technology trials, and hosting a problem-solving event”.

    “We propose to undertake a problem-solving event (otherwise known as a ‘hackathon’) together with industry later in 2017,” ASIC says.

    ASIC is currently trialing a batch of regtech offerings including:

    • a cognitive tool to analyse webpages of service providers in the self-managed superannuation fund sector;
    • machine learning applications assessing document sets to identify useful evidence; and,
    • a social media monitoring tool; and markets and graph analytic tools to support identification of connections between entities.

    Further, ASIC says it regularly consults on tech-related issues with a group of seven offshore regulators such as the Monetary Authority of Singapore (MAS), the UK Financial Conduct Authority (FCA), and the Ontario Securities Commission (OSC)

    “ASIC has also signed cooperation agreements with MAS, FCA, OSC, the Capital Markets Authority of Kenya and the Financial Services Authority of Indonesia (Otoritas Jasa Keuangan),” the report says. “To date, ASIC has received two referrals under these agreements. Informally, ASIC has also met with numerous international fintech businesses referred to us by industry or trade bodies, including delegations from the United Kingdom and the United States.”

    – David Chaplin, Investment News NZ

    Investor Strategy News


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