The government has released its draft legislation that would see the creation of an "enhanced regulatory sandbox" to support innovation in financial services.
The fintech regulatory sandbox, which was first announced during the budget, will allow a broad scope of activities to be tested without the need to meet all the existing licensing requirements of the Australian Securities and Investments Commission (ASIC). The enhanced regulatory sandbox will help firms overcome the initial regulatory burden and costs of licensing that may otherwise hinder innovative offerings, a government news release said.
Under the proposed legislation, firms will be able to test a wider range of new fintech products and services, including issuing and facilitating consumer credit; providing holistic financial advice in relation to superannuation, life insurance, domestic and international securities; issuing non-cash payment products; and providing a crowd-funding service.
Treasurer Scott Morrison called it a "game changer for competition in the financial services sector".
"[It] continues the Turnbull Government's strong support of Australian fintech which has helped Australia become the second largest alternative finance market in the Asia-Pacific," he said.
The 24‑month testing timeframe will improve firms' ability to evaluate the commercial viability of new concepts, promoting greater competition and delivering more choice for Australian consumers, the release said.
Firms will need to adhere to robust consumer protections and disclosure requirements, including responsible lending obligations, best interests duty, and the need for adequate compensation and dispute resolution arrangements.
Consultation on the draft legislation is open until 3 November, and on the draft regulations until 1 December.