Australia's securities watchdog has released a number of waivers that will enable eligible fintechs to test services without the need to hold an Australian Financial Service licence or to make individual applications to the regulator.
Under the scheme, fintechs will be able to test their service for up to 12 months with up to 100 retail clients on the condition that they meet a number of consumer protection standards and notify the regulator before commencing.
The Australian Securities and Investment Commission (ASIC) claims that its sandbox initiative is the first such scheme from a major jurisdiction and it hopes it will encourage more innovation in its banking sector.
"Fintech and start-up businesses now have more pathways than ever to begin testing the viability of innovative financial services and credit services consumers, before incurring many of the regulatory costs normally associated with running their business," said ASIC commissioner John Price.
While ASIC may claim that its licensing exemption scheme is new, the concept of regulatory sandboxes is proving increasingly popular as jurisdictions compete to attract fintech startups. This is especially so in Asia Pacific where Malaysia, Hong Kong, Singapore and Thailand have all launched regulatory sandbox schemes this year.
In addition the Financial Conduct Authority in the UK launched its own sandbox scheme back in 2014. However, while the majority of industry observers have praised regulators for a proactive approach to overseeing fintech development, others have warned that sandbox schemes risk favouring the chosen applicants over others and creating an uneven playing field.
Ultimately, it is the technology that should be the differentiating factor not the standing with the regulator, they warn.