By Michelle Chasser and Felix Charlesworth
On 24 October 2017, the Federal Government released draft legislation and regulations (Draft Bill) enhancing the existing regulatory sandbox for current and emerging FinTech products and services.
This comes almost one year after the Australian Securities and Investments Commission (ASIC) established a sandbox which granted particular exemptions to FinTech businesses from obtaining an Australian Financial Services Licence (AFSL) and/ or an Australian Credit Licence (ACL) if certain conditions were met.
As projected in the 2017/2017 Federal Budget, the enhanced sandbox will expand the types of permissible activities and testing timeframe beyond the existing sandbox parameters established by ASIC. The purpose of this enhanced sandbox is to further promote Australia’s FinTech capability by supporting start-ups and innovative businesses to develop, test and launch their financial and credit services.
Among other things, the Draft Bill expands on the previous sandbox by:
- increasing the testing timeframe for eligible financial services and products from 12 months to 24 months;
- testing the provision of advice in relation to general insurance products, life insurance products or superannuation products which are issued by APRA authorised institutions (subject to certain exposure limits);
- permitting the issuing of non-cash payment facilities as well as the provision of crowdfunding services; and
- permitting the lending of credit to consumers under credit contracts. These contracts are restricted to a term that does not exceed 4 years and a credit limit of more than $2,000 and less than $25,000.
It should be noted that these expanded services will still be subject to the current sandbox limitations of having no more than 100 retail investors and having a total customer exposure of no more than $5 million.
Interested parties are invited to comment on the Draft Bill by emailing their responses to firstname.lastname@example.org. The consultation on the exposure draft legislation is open until 3 November 2017 and the consultation on the exposure draft regulations (and accompanying explanatory statement) is open until 1 December 2017.