ASIC’s attempt at a startup nurturing product for the Fintech industry has reached the six-month mark. Sold as a world first, the so-called, “Regulatory Sandbox,” enables Fintech startups to test their product in real-world environments before applying for a financial services license. The total number of start-ups that have taken up this unique and innovative offer?
While the slow uptake can be blamed on a variety of circumstances – the Financial Review pointing out that the announcement of the new offering was made over Christmas, and little has been done to promote it since then – the question remains as to whether the marketing or the offering itself at fault.
Eligibility was restricted to businesses that were distributing products or providing advice and there were a number of other restrictions also –
– No more than 100 retail clients
– Planning to test for no more than 12 months
– Have total customer exposure of no more than $5 million
– Have adequate compensation arrangements (such as
professional indemnity insurance)
– Have dispute resolution processes in place
– Meet disclosure and conduct requirements
This creates a sort of perfect storm requirement, where a start-up must be somewhat established – with dispute resolution, professional indemnity insurance, and other structures in place, but still not have an exposure of more than $5 million, and have limited clients. Also, this growing business must be prepared to delay its application for a license while still adhering to restrictive legislative requirements through the sandbox. Finally, the question has to be asked as to whether it’s good practice for an organisation to position itself as a start-up in the highly competitive Fintech market, a mantle it may end up carrying for longer than it wishes to.
ASIC is considering how to broaden the appeal of the offering, and may potentially increase the sandbox to include insurance or other complimentary technology start-ups. The goal of increasing competition in the industry is an admirable one, but questions are still being asked as to whether there are other motivations – such as deregulation – at play in the creation of the sandbox. Regardless, ASIC hopes that it will prove to be a fruitful breeding ground for the next generation of Fintech entrepreneurs.