Aussie finance regulators work alongside startup scene in the name of innovation

ASIC and RBA among those to have invited fintech and regtech startups through its doors for assistance in understanding regulatory requirements and identifying the viability of their products in the market.

Since 2015, the Australian Securities and Investments Commission (ASIC) has met with 514 finance technology (fintech) and regulatory technology (regtech) startups through its Innovation Hub, with 486 receiving further "assistance" facilitated by the watchdog.

According to ASIC, fintech businesses that engage with its Innovation Hub prior to submitting an application for approval for an Australian financial services (AFS) or credit licence receive approval on average 22% faster -- 111 days -- than those seeking these licences without assistance -- 135 days.

Of the 514, 69 were regtechs, 69 were digital advisors, 63 considered themselves payments or remittance facilities, 47 were marketplace lenders, and 40 were consumer credit providers.

See also: ASIC wants to see more adoption of regtech by Australia's financial sector

The Innovation Hub was stood up in 2015 as a way for ASIC to help fintechs understand regulatory obligations. The scope was later expanded to cover regtechs as well.

ASIC said a total of 96 licence applications have been approved -- resulting in 78 full licences -- to 86 fintech service providers out of 145 licence applications hailing from 124 fintechs since March 2015. Of those, 28 were withdrawn by the applicant and nine are still in progress.

Of the 96 granted applications, 20 were for marketplace lenders, 43 were received from crowd source funding intermediaries, 21 were to a non-cash payment facility, and three were granted to neo-banks.

Meanwhile ASIC's Regulatory Sandbox initiative, which was stood up in 2017, has seen a total of seven entities participate.

ASIC said a further 44 entities have submitted preliminary notifications but do not meet the criteria necessary to qualify.

The sandbox allows fintech businesses to test certain products or services for a limited period of time without having to hold an Australian financial services or credit licence.

The stats from ASIC were revealed in a submission [PDF] to the Select Committee on Financial Technology and Regulatory Technology and its probe into the opportunities the two vectors present to Australia.

ASIC used its submission to highlight that it currently has over 16 cooperation and referral agreements with international regulators to look at the space, including what learnings and opportunities Australia can glean from international fintech and regtech industries.

"ASIC considers that the regtech sector has enormous potential to help organisations build a culture of compliance, identify learning opportunities, and save time and money relating to regulatory matters," it wrote.

The federal government also gave it AU$6 million in August 2018 to raise regtech awareness among Australian organisations.

The Reserve Bank of Australia (RBA) in its submission [PDF] to the inquiry said it also "engages extensively with a wide range of stakeholders in the payments system, including payments-focused fintech firms and associated industry bodies".

"As a general policy, the bank is open to discussions with any parties that may be affected by the bank's policy decisions and/or to discuss developments in the payments industry," it wrote.

The RBA said a recent focus in relation to its engagement with payments industry participants has been the application of new technologies and innovation in the payments system, including for the use of distributed ledger technology -- blockchain -- and payments-related fintech activity on a broader scale.

"The bank's engagement with stakeholders may take the form of informal meetings with interested parties, participation in industry forums, and more-targeted liaison on particular issues," it continued.

Meanwhile, the Australian Competition and Consumer Commission (ACCC) used its submission [PDF] to the committee to focus on the benefits fintech firms would bring to the delayed Consumer Data Right (CDR).

"The success of the CDR depends on both fintechs and consumers participating in the ecosystem, and on ensuring that the CDR framework is flexible, interoperable, and adaptive," the ACCC wrote.

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