The Australian Securities and Investments Commission (ASIC) is shuttering its existing financial services regulatory sandbox initiative, replacing it from September 1 with what it has labelled the enhanced regulatory sandbox (ERS).
The current ASIC sandbox initiative was established in 2016 to allow eligible fintech companies to test certain products or services for up to 12 months without an Australian financial services (AFS) licence or Australian credit licence.
The ERS will expand on the current sandbox to allow for a longer testing period, up to two years, for a broader range of financial services and credit activities. It will also be available for a wider range of businesses, including existing licensees.
ASIC said the ERS is aimed at facilitating financial innovation in Australia, as was the existing sandbox. The existing sandbox, however, has only seen a total of seven entities participate since 2016.
Revealing the information within a submission to the Select Committee on Financial Technology and Regulatory Technology in January, ASIC also said a further 44 entities had submitted preliminary notifications to join the sandbox, but they did not meet the criteria necessary to qualify.
As further detailed in the ERS information sheet, participants must only provide certain types of financial services and products, only engage in certain types of credit activities, not exceed the relevant exposure limits for clients, only test a product or service for 24 months or less, and comply with any make-good orders the regulator issues.
Deposit products, non-cash payment facilities, general insurance, life insurance, superannuation, and simple managed investment schemes are classed as examples of eligible retail-facing services to be tested.
Participants must be Australia-based and they must also pass the net public benefit test and innovation test set by ASIC.
Since 2015, ASIC has met with 514 fintech and regtech startups through its Innovation Hub, with 486 receiving further "assistance" facilitated by the watchdog.
According to ASIC, fintech businesses that engaged with its Innovation Hub prior to submitting an application for approval for an AFS or credit licence, on average, received approval 22% faster -- 111 days -- than those that sought 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.
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 crowdsource funding intermediaries, 21 were to a non-cash payment facility, and three were granted to neo-banks.