11 February 2020

New laws passed to drive fintech innovation and competition in the financial sector

Australian consumers and the booming fintech ecosystem will benefit from laws passed by the Parliament last night to create a fintech regulatory sandbox.

The sandbox allows fintechs to test new products and services for 24 months without obtaining a financial services licence or a credit licence from the Australian Securities and Investments Commission (ASIC). It will provide a safe environment to help fintechs create a minimum viable product to take to market – to work out if their products and services are robust and have value for consumers.

By removing barriers to entry for new fintechs, the regulatory sandbox will enable greater competition in the financial system, which is critical in ensuring that both consumers and businesses get value for money from the financial products and services they use.

To ensure unlicensed testing does not pose a risk to consumers, a range of strong consumer protections will be in place, including limits on the products and services that can be tested and limits on the financial exposures of retail clients.

‘A strong fintech ecosystem means a more competitive financial market landscape – one that is consumer-driven, efficient and among the world’s leaders,’ Assistant Minister Hume said.

‘The Morrison Government’s regulatory sandbox will encourage more Australian fintechs to test new products without the red tape that traditionally comes with entering the market.

‘As a mature, diverse and internationally connected ecosystem, Australia is an attractive destination for fintech investment globally. The Morrison Government is seizing this valuable opportunity to grow the sector even further.’

The Treasury Laws Amendment (2018 Measures No. 2) Bill 2019 builds significantly on a regulatory sandbox launched by ASIC in 2016, expanding the scope of what can be tested and how long businesses can test. The enhancements enable firms to test specified financial services including financial advice, the issuing of consumer credit contracts and facilitating crowd-sourced funding.

The Bill also makes a number of minor, technical amendments to the Early Stage Venture Capital Limited Partnership, Venture Capital Limited Partnership and Tax Incentives for Early Stage Investor regimes to ensure that these provisions operate in accordance with their original policy intent.

These changes will ensure that Australian fintech is internationally competitive, and that all Australians spend less time and money managing their own affairs. Having a competitive and innovative financial system is a key part of the Morrison Government’s plan for a stronger economy.