ASIC Releases World-First Licensing Exemption for Fintech Firms

The Australian Securities and Investments Commission (ASIC) today released class waivers which will allow eligible Fintech Fintech Financial Technology (fintech) is defined as ay technology that is geared towards automating and enhancing the delivery and application of financial services. The origin of the term fintechs can be traced back to the 1990s where it was primarily used as a back-end system technology for renowned financial institutions. However, it has since grown outside the business sector with an increased focus upon consumer services.What Purpose Do Fintechs Serve?The main purpose of fintechs would be to suppl Financial Technology (fintech) is defined as ay technology that is geared towards automating and enhancing the delivery and application of financial services. The origin of the term fintechs can be traced back to the 1990s where it was primarily used as a back-end system technology for renowned financial institutions. However, it has since grown outside the business sector with an increased focus upon consumer services.What Purpose Do Fintechs Serve?The main purpose of fintechs would be to suppl Read this Term businesses to test certain specified services without the need to hold an Australian Financial Services (ASF) or credit licence.

So far, ASIC’s fintech licencing exemption is unique as no other major jurisdiction has implemented such a class waiver, allowing eligible businesses to notify the regulator and then commence testing without the requirement for an individual application process.

The exemption reflects ASIC’s commitment to facilitating innovation in financial services.

ASIC also released a corresponding regulatory guide entitled "Testing fintech products and services without holding an AFS or credit licence (RG 257)" which contains information about Australia's 'regulatory sandbox' framework.

ASIC Commissioner John Price commented: “Fintech and Startup Startup A company operating within its first stage of investing is known as a startup. While startups may give the impression that the company must be new, that is not always the case.Many companies can have this designation after nearly three years of existence. Typically, a company exits the startup status after a period between 3 to 5 years or after successful funding rounds where capital is acquired. Startups tend to derive out of the belief that there is a demand for a service or product which is c A company operating within its first stage of investing is known as a startup. While startups may give the impression that the company must be new, that is not always the case.Many companies can have this designation after nearly three years of existence. Typically, a company exits the startup status after a period between 3 to 5 years or after successful funding rounds where capital is acquired. Startups tend to derive out of the belief that there is a demand for a service or product which is c Read this Term 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 Licencing Exemption

ASIC’s fintech licencing 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 their business.

The exemption was initially proposed to facilitate innovation in financial services. ASIC 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.

Businesses which are not eligible for the fintech licencing exemption may seek an individual exemption. “Individual applications are an important part of Australia’s regulatory sandbox framework,” continued Price. “For instance, this option is open to existing licencees who wish to test an innovative product or service and comply with a modified version of the law,” he added.

Information about the services covered by the fintech licencing exemption can be found on ASIC's website.