Australia – Page 6 – FinTech and Blockchain Law Watch

Adapt or die, the reality for retail banks during a digital revolution

Mar 26 2017

Traditional banking is a thing of the past, at least according to 203 senior retail banking executives surveyed by the Economist Intelligence Unit.

According to an Economist Intelligence Unit report for Temenos, the EU’s Second Payment Services Directive (PSD2), which will force banks to provide interfaces, APIs and data to third parties, is set to “tip the scales between banks and FinTechs for customer loyalty.” More than half of financial transactions will be made through FinTech companies rather than traditional retail banks by 2020, as the latest EU payments directive unleashes competition.

Found out that you can’t play in the sandbox?

Feb 09 2017

By Jim Bulling and Michelle Chasser

The Australian Securities and Investment Commission’s (ASIC) regulatory sandbox is up and running exempting qualifying businesses from holding an Australian financial services licence or Australian credit licence. There are a number of reasons why a business may not be eligible including:

the business will issue the financial products;
it is likely that there will be more than 100 retail clients
it is likely that the value of the financial products will be more than $5 million;
12 months testing will not be sufficient; or
the financial products the business deals with fall outside the eligible products for the sandbox which are:
- simple managed investment schemes;
- non-cash payment systems issued by a bank;
- listed securities;
- government bonds; and
- unsecured loans.

So what are your options if you don’t meet all the eligibility criteria but don’t want to obtain your own licence?

ASIC provides update on the Innovation Hub

Dec 16 2016

By Jim Bulling and Michelle Chasser

In a recent speech, Australian Securities and Investments Commission Chairman Greg Medcraft released information on FinTech businesses which have taken advantage of the Innovation Hub established by ASIC in April earlier this year. Robo-advisers and marketplace lenders were the most prevalent types of businesses to approach the Innovation Hub. The 109 different businesses that the Innovation Hub engaged with this year included:

25 robo-advisers
22 marketplace lenders
17 payments businesses
11 credit providers
9 crowdsourced equity providers

ASIC has also noted that those who received assistance from the Innovation Hub before applying for an Australian financial services licence were approved on average 95 days or 45% faster than those who hadn’t.

Will there be an Asia Pacific ‘FinTech Passport’ in the future?

Dec 14 2016

By Jim Bulling and Michelle Chasser

Australian Securities and Investments Commission (ASIC) Chairman, Greg Medcraft, has discussed cooperation between FinTech regulators at the recent International Institute of Finance Chief Risk Officer Forum in Singapore.

The Chairman noted “because the internet knows no boundaries” cooperation and collaboration between regulators is critical and developing responses to FinTech should not be done in isolation. The Chairman then highlighted the following steps required for cooperation.

1. Sharing information

Regulators in Australia, UK, Singapore, Canada, Kenya, South Korea, Switzerland and India have entered into various cooperation agreements with other regulators to share information about FinTech developments and emerging trends in their markets. Many of the cooperation agreements also allow FinTech businesses to access Innovation Hubs in other jurisdictions. The Chairman noted that ASIC was also informally in regular contact with regulators in the US and Europe.

2. Harmonisation

While ideally regulators would work towards harmonising their regulatory responses and approaches, it was acknowledged that this will be a challenge due to competition between countries to attract FinTech businesses. The Chairman raised the possibility of introducing a “fintech passport” which could ease entry into other jurisdictions for businesses. Another possible solution raised was to develop “equivalence processes” around regulation.

Regulating digital advice in Australia

Dec 13 2016

By Jim Bulling and Meera Sivanathan

Recently, the Australian Securities and Investments Commission (ASIC) presented its views on regulating digital advice at a Financial Services Council event. The discussion provided an overview of the regulator’s priorities in this space. Below are a few key takeaways relevant to those currently providing or seeking to provide digital advice:

Clear disclosure: ASIC would like to see clear disclosure in relation to the services and advice a consumer may expect to receive and express statements regarding advice that the consumer will not receive. Consumers need to be able to easily identify what advice will and will not be provided to them.
Testing consumer knowledge: ASIC suggests ‘testing’ potential consumers in the following ways:

With respect to consumer protection – implementing methods to test consumer understanding of the scope of advice provided – that is, what advice will and will not be provided. Such protocols may alleviate any risk that a potential consumer is unaware of the scope of advice to be provided.
With respect to better understanding your client, implementing ‘quizzes’ to gauge the consumer’s level of knowledge regarding different products, which may be offered. This could give the digital advice provider an idea of the level of knowledge and understanding that the consumer may possess in relation to complex products.

Record keeping: Companies providing digital advice should have appropriate and robust algorithm record keeping systems. Ideally, the systems in place should control, monitor, review and effectively record any changes made to the algorithms. Digital advice providers should be able to substantiate the reasons for updating the algorithm, which underpins the advice given. Some examples of possible record keeping measures relating to algorithms include automated reports which can be downloaded and provided to ASIC if requested or snap shots in time.

UK Department for International Trade announces FinTech mission to Australia

Dec 07 2016

By Jonathan Lawrence

The UK’s Department for International Trade (DIT) has announced its first FinTech mission to Australia taking place in Sydney and Melbourne from 20-23 March 2017.

DIT will select 8-12 UK FinTech companies to participate in the mission to Australia where they will participate in a programme of events and activities. Delegates will spend two days in Sydney, two days in Melbourne and an optional fifth day in Australia or New Zealand. The delegates will meet with and pitch to Australian financial institutions and venture capital firms, visit FinTech hubs, meet the regulator and government ministers, network with the Australian FinTech community, hear from UK FinTech companies that have found success in Australia and schedule meetings with potential customers and partners.

British Consul General in Sydney and Director-General UK Trade & Investment for Australia and New Zealand, Nick McInnes said: “We are very pleased to have the opportunity to bring a group of UK FinTech companies to Australia for the first time and introduce them to the local market. While FinTech in Australia is still in relatively early stages, the industry is growing rapidly and there are many opportunities for UK companies to set up, collaborate and succeed. The FinTech market in Australia is forecast to grow to over AU $4 billion by 2020, of which AU $1 billion will be completely new added value to the Australian economy, so now is an ideal time for UK companies to enter the market”.

For more details, please click here.

Australian and Kenyan financial regulators sign co-operation agreement

Nov 16 2016

By Jim Bulling and Michelle Chasser

The Australian Securities and Investments Commission (ASIC) and the Capital Markets Authority of Kenya (CMA) have signed a co-operation agreement to share information about innovation in their markets including:

emerging market trends and developments; and
regulatory issues relating to innovation in financial services.

Kenya was an early adopter of FinTech with the launch of mobile phone based payments system M-Pesa back in 2007. It has since become one of the leading FinTech countries in Africa particularly in payments and credit innovations.

FinTech in Canada – Towards Leading the Global Financial Technology Transition

Nov 15 2016

By Robert Zinn and Jim Bulling

The Digital Finance Institute is a prestigious Canadian-based think tank for FinTech established in 2013 with a mandate to address the balance of innovation and regulation; support initiatives for financial inclusion; and advocate for diversity in FinTech. The Digital Finance Institute also promotes FinTech in Canada through conferences and international alliances; the creation of Canada’s national FinTech Awards; the FinTech Cup, the new university FinTech startup challenge and by preparing research papers on FinTech.

Robert Zinn and Jim Bulling contributed insight and content to the U.S. and Australian FinTech ecyosystems.

To read this publication, click here.

Possible AML implications for FinTechs

Nov 07 2016

By Jim Bulling and Michelle Chasser

The Australian Transaction Reports and Analysis Centre (AUSTRAC) is encouraging FinTech businesses to make contact about Australia’s anti-money laundering and counter-terrorism financing regime (AML/CTF regime) and how it may affect their business. A dedicated online contact form has been established which allows enquiries to be made directly to the Policy and Guidance team.

Businesses which provide a ‘designated service’ are reporting entities which have obligations under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006. There are a number of designated services that a FinTech business may provide including making loans, issuing a stored value card, giving effect to remittance arrangements, issuing interests in a managed investment scheme and (in the capacity of an Australian financial services licensee) arranging for a person to receive a designated service.

Currently activities relating to digital currencies such as BitCoin are not designated services. However, in October 2016 the Attorney General’s Department released its draft project plan for the implementation of the recommendations from the statutory review of the AML/CTF regime. Under the project plan, legislative proposals to regulate digital currencies under the AML/CTF regime will be developed by the first half of 2017.

Regulators in Australia and Ontario sign co-operation agreement

Nov 07 2016

By Jim Bulling and Michelle Chasser

The Australian Securities and Investments Commission (ASIC) and the Ontario Securities Commission (OSC) have signed a co-operation agreement to promote FinTech innovation. The agreement will make expansion into the Australian and Ontarian markets easier for growing FinTech businesses.

A referral mechanism has been created under the new agreement which allows ASIC to refer Australian FinTech businesses wanting to enter the Ontarian market to OSC and vice versa. Referred businesses will receive support to understand the market’s regulatory framework and how it applies to them from dedicated staff at the relevant regulator. To qualify for support FinTech businesses will need to meet the eligibility criteria of their home regulator including being a new or early stage FinTech business which has an innovation or product which will likely provide benefits to investors and consumers.

Both ASIC and OSC have established internal teams to assist FinTech businesses with their regulatory obligations and encourage development of the FinTech industry. ASIC’s Innovation Hub was established in April 2015 and OSC recently established LaunchPad in October 2016.

ASIC and OCS have also committed to share information about emerging market trends and potential impacts on regulation.

ASIC has entered into similar co-operation agreements with the UK Financial Conduct Authority and the Monetary Authority of Singapore amongst others this year.

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