Support ASIC to cultivate fintech ecosystem

11-Sep-2017

By Daniel Paperny

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ASIC must be afforded more time and resources to respond to the pace of change fuelled by the rise of fintech start-ups in Australia and cultivate the right policy settings for a sustainable innovation ecosystem, according to H2 Ventures.

In an interview with financialobserver, H2 founding partner Ben Heap said increased interest from a conglomerate of federal government, regulatory and industry stakeholders over the years has helped prompt a changing narrative around fintech innovation in Australia.

Heap said start-up businesses provided increased competition in the financial services sector which would in turn lead to better outcomes for the end consumer.

However, he said that innovation should not come at the expense of consumer protections and regulators like ASIC needed to be supported with greater resources and time to recognise their efforts in responding to innovations in fintech.

“On the regulatory side, there’s been a really important commitment to change that’s started from Treasurer Scott Morrison and that message has been clearly pushed both in the start-up community and also with the regulators [who] understand the importance of supporting the start-up community,” Heap said.

“Culturally, a start-up’s approach to agility isn’t necessarily [consistent with] the normal culture within a regulator and regulators must continue to ultimately have a relatively important risk threshold and a high compliance threshold.

“That doesn’t necessarily mean you can’t support the start-up ecosystem and new innovative models and ideas [as] I think the regulators like ASIC are genuinely committed to doing a better job of understanding the requirements of start-ups and improving processes to support those agile startups in their product and development models.”

Ethical investing start-up Goodments was the first fintech to enter ASIC’s regulatory sandbox, a licensing exemption that allows fintech businesses to test a range of new financial products and services without an Australian financial services licence.

But there has been criticism from various industry participants that while start-ups that did not qualify to use the sandbox could apply to ASIC for an individual ruling, there was a lack of clear guidance on the criteria the regulator would apply to such applications.

Heap argued that it was important to recognise the significance of ASIC “taking the first step” and introducing a variety of initiatives to work more closely with Australia’s fintech start-up community.

“We might be critical of the lack of traction today but I’d prefer to give ASIC a little bit more time and a little bit more recognition for the path they’re seeking to go down,” Heap said.

“Because start-ups are good at this, start-ups will launch new products that don’t work and fix them and change them until they do.”

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