Archive: March 2016

1
Australian and UK financial regulators sign co-operation agreement
2
Providing digital advice to retail clients
3
Marketplace lending how-to from the Australian regulator
4
The Federal Reserve Takes Steps Towards Developing Faster Payments and Settlement
5
The French take on the blockchain
6
PREPAID ACCESS GARNERS REGULATORY ATTENTION
7
Australian Government gets more FinTech friendly
8
Japan Introduces Regulation on Bitcoin Exchanges
9
Islamic compliant marketplace financing
10
Salesforce is all in on Fintech

Australian and UK financial regulators sign co-operation agreement

By Jim Bulling and Michelle Chasser

The Australian Securities and Investments Commission (ASIC) and the UK Financial Conduct Authority (FCA) have signed a co-operation agreement to promote fintech innovation. The agreement will make expansion into Australian and UK markets easier for growing fintech businesses.

Both ASIC and FCA have already established innovation hubs to assist fintech businesses with their regulatory obligations and encourage development of the industry. A referral mechanism has been created under the new agreement which allows ASIC to refer Australian fintech businesses wanting to enter the UK market to FCA and vice versa. Referred businesses will then receive the same support from the other country’s innovation hub as local businesses.

ASIC and FCA also undertake to share information about emerging market trends and developments, regulatory issues pertaining to innovation in financial services and referred businesses. Shared information will be valuable for developing fintech regulations.

Providing digital advice to retail clients

By Jim Bulling and Michelle Chasser

The Australian Securities and Investments Commission (ASIC) has released a draft guide on digital financial product advice for consultation. The draft guide does not introduce new regulatory concepts but clarifies some of the uncertainties that have arisen about how existing obligations will apply to robo-advisers.

Generally, robo-advice is provided using algorithms and without the involvement of a natural person. To ensure that consumers are provided with competent advice ASIC is proposing that at least one manager who is used to demonstrate the organisational competence of the licensee (Responsible Manager) must meet the training and competence standards applicable to natural persons who provide advice to retail clients.

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Marketplace lending how-to from the Australian regulator

By Daniel Knight

The Australian Securities and Investments Commission (ASIC) has released guidance for marketplace lenders navigating Australia’s existing dual licensing regimes for credit and financial products.  While the guidance is helpful, it does not overcome the need for marketplace lenders, like other fintech innovators, to contort themselves into existing regulatory boxes.

ASIC’s Information Sheet 213 focuses on establishing a marketplace lending platform using Australia’s managed investment scheme regime, by far the most popular Australian structure where a trust is interposed between borrowers and lenders.  This regime was designed for pooled collective investment vehicles, such as traditional managed funds, and is not well adapted to pure peer-to-peer lending.  Individual regulatory relief is often needed to overcome these challenges – for example, to facilitate investor withdrawals – and the Information Sheet helpfully outlines the relief ASIC has previously given to industry players.

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The Federal Reserve Takes Steps Towards Developing Faster Payments and Settlement

By Sean Mahoney

The Federal Reserve announced that it engaged McKinsey & Company to help evaluate faster payments solution proposals being solicited by the Federal Reserve from members of its Faster Payments Task Force.  The Task Force consists of representatives of participants in the financial services system, including banks and technology firms.  This step can be viewed as part of a process of making improvements to the US payments system.  It is worth monitoring as any such improvements will likely lead to commercial opportunities.

See the press release here.

The French take on the blockchain

By Claude-Etienne Armingaud

On March 24, the French National Assembly hosted a day-long conference on “Blockchain: Disruption and Opportunities.”

This event aimed at raising awareness of the French elected representatives and corporate executives on blockchain issues and potential uses for the digital transformation of society as a whole.

The closing statement provided by Emmanuel Macron, the French Minister of Economy, Industry and Digital Economy, was subsequently echoed by his announcement on March 29 of the upcoming adaptation of the French finance regulatory framework in order to progressively allow the introduction of the technology.

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PREPAID ACCESS GARNERS REGULATORY ATTENTION

By Sean Mahoney

Bank regulators are paying more attention to the role of banks in the prepaid card industry as evidenced by their new guidance on the applicability of know your customer requirements and proposed regulations on record-keeping with respect to master deposit accounts for prepaid cards and other products utilizing “pass-through” deposit insurance.

To learn more about the Interagency Guidance to Issuing Banks on Applying Customer Identification Program Requirements to Holders of Prepaid Cards, which provides a framework to determine whether or not a bank must apply its customer information program to holders of prepaid products for which the bank is the issuer, please visit our Consumer Financial Services Watch Blog at Prepaid Access Garners Regulatory Attention.

 

Australian Government gets more FinTech friendly

By Jim Bulling and Michelle Chasser

The Australian Government has released its responses to the industry’s priorities for fintech development which it has called “Backing Australian FinTech”. As well as affirming existing commitments, such as introducing a crowd sourced equity funding (CSEF) framework and an incubator support programme, the paper includes a number of initiatives that the Government proposes to undertake. New developments include:

  • introduction of an entrepreneur visa in November 2016 for foreign entrepreneurs with innovative ideas and financial backing from a third party;
  • possibly increasing the asset and turnover eligibility threshold for CSEF to A$25 million and reducing cooling off periods for investors to 48 hours;
  • consultation on a potential framework for crowd sourced debt funding;
  • increasing the maximum fund size of Early Stage Venture Capital Limited Partnerships (ESVCLPs) to A$200 million and providing a 10% tax offset on capital invested;
  • introduction of a mechanism to allow Innovation Australia to issue binding advice in relation to the definition of ineligible activities for ESVCLPs;
  • Productivity Commission inquiry into options for improving access to comprehensive credit reporting (CCR) data;
  • a regulatory guide for robo-advice providers;
  • possibly allowing licensed insurance brokers to sell insurance policies from unauthorised foreign insurers where they offer consumers a better price and appropriate consumer protection;
  • possibly applying anti-money laundering laws to digital currencies;
  • a commitment to address the ‘double taxation’ of using digital currency to purchase goods already subject to the Goods and Services Tax (GST);
  • establishment of a new Cyber Security Growth Centre; and
  • a ‘regulatory sandbox’ in Australia to allow FinTech start-ups to test their products and business models.

Backing Australian FinTech indicates that 2016 will be a busy year for fintech regulation in Australia.

Read Backing Australian FinTech here.

Japan Introduces Regulation on Bitcoin Exchanges

By Ayuko Nemoto and Yuki Sako

To date, virtual currencies and related service providers remain unregulated in Japan.  However, on March 4, 2016, the Cabinet of Japan approved an amendment bill to the Payment Services Act of Japan and submitted it to the Diet (“Amendment Bill”).

Most importantly, the Amendment Bill aims to bring the industry under the supervision of the Financial Services Agency of Japan (“FSA”) and introduce new registration requirements for virtual currencies exchanges, including those based outside of Japan that provide services to customers in Japan.  Exchanges based outside of Japan may be registered as a “Foreign Exchange” if they are registered or licensed in their home jurisdiction; however, they must have an office in Japan and designate a “representative of Japan,” the failure of which would result in disqualification.

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Islamic compliant marketplace financing

By Jonathan Lawrence

It is estimated that 29.7% of the global population will likely be Muslim by 2050, against 23.2% in 2010. The proportion of Muslims in Europe is currently around 6% of the population and is projected to be 8% by 2030. This creates a large business and consumer base to consider for FinTech ventures. How can you make your business platform compliant with the principles of Islam to appeal to this market?

One way has been to create a financing platform using the Murabaha method. This is an Islamic finance technique used to provide financing on terms compliant with Islamic principles. For example, there is no direct interest rate return made by the financier as charging interest is not considered to be compliant.

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Salesforce is all in on Fintech

By Cameron Abbott and Simon Ly

Salesforce wants to get in on the Fintech act, recently announcing the public launch of “Financial Services Cloud”. This is a service that allows financial advisors to be more productive with relevant client information.

The service aims to better position advisors in “managing client life goals, household relationships and client profiles from a connected platform”. Financial Services Cloud has a variety of features including portfolio management, prospecting and data management whilst also assisting with compliance with new and proposed regulatory changes. These features leverage areas which Salesforce is historically strong in, namely automation and analytics.

While start-ups abound, Salesforce clearly wants to bring its pedigree to the table to work with large established market participants. This new offering is certainly likely to be sold strongly to Salesforce’s existing customers, including Goldman Sachs, Deutsch Bank and Merrill Lynch.

With Financial Services Cloud, it will be interesting to see if this takes over from in-person meetings that customers may have with their advisors, which can be both clunky and time consuming. Salesforce seeks to provide some real data-driven insight into investment decisions that will give customers more of an understanding of their personal wealth whilst increasing the oversight on wealth advisors.

You can find out more from Simon Mulcahy (General Manager of Financial Services, Salesforce) here.

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