Global competition over Fintech companies, one of the fastest growing industry in the world with billions invested yearly, intensified today with Australia announcing they are largely throwing out the rulebook for the first 12 months. Scott Morrison, Treasurer of Australia, stated:
“From today, all eligible businesses will be able to test a range of financial or credit services with up to 100 retail clients and unlimited wholesale clients for up to twelve months without the need to apply for an Australian Financial Services Licence or Australian Credit Licence and without seeking approval from ASIC.”
The move mirrors UK’s sandbox following a signed partnership by the two countries to encourage Fintech innovation earlier this year. During the testing period, ordinary rules applicable to financial transactions or credit services are relaxed or fully waived, with only basic requirements applicable, such as maintaining “key consumer protections, including dispute resolution and compensation arrangements to ensure consumers are adequately safeguarded.”
Australia has gone further than UK as the Australian Securities and Investments Commission (ASIC) needs only be notified before Fintechs commence testing, while UK’s Financial Conducts Authority requires approval to join their sandbox. Morrison stated:
“The creation of a regulatory sandbox builds on the existing efforts of the Turnbull Government and the financial regulators to support the growth of the FinTech industry; including tax concessions to encourage investments in early-stage start-ups, the recent introduction of legislation into the Parliament for a crowd-sourced equity funding regime as well as the creation of ASIC’s Innovation Hub and Australian Transaction Reports and Analysis Centre’s (AUSTRAC) dedicated contact point for innovative businesses.”
The move is in stark contrast to the approach taken by America where a Fintech Charter was recently announced by the Office of the Comptroller of the Currency to streamline regulations across the 52 states. A recent publication by one of the largest law firms in US, Paul Hastings LLP, states that chartered Fintechs “will be subject to the same laws, regulations, examination, reporting requirements, and ongoing supervision as other national banks.” They further explicitly state that the charter benefits “full service banks, which no longer will have to compete with nonbank Fintech companies, which they perceive are operating on an uneven playing field, as the laws and regulations applicable to all banks will apply to Fintech Banks.”
In contrast, Britain has been leading a very different approach exemplified by the setting up of an Innovation Centre, funding for research and guidance, as well as a sandbox testing period when rules are reduced or fully waved. In signing a partnership with five countries, including Australia, Singapore, South Korea, China and Hong Kong, Britain has further exported its approach with all five now likely to emulate much of its strategy.
However, the United States is currently in a limbo period while it awaits its new administration. Any announcements from regulators during this stage may be short lived as the Trump administration is likely to take a very different approach, far more in line with that of United Kingdom, than the current restrictive regulatory environment.
Image from Shutterstock.
Last modified: December 16, 2016 14:27 UTC