FinTech and the Regulators

What’s the collective noun for a group of financial services regulators? Given the current focus on FinTech sand box regulation and the cultivation of innovation, but also the somewhat ambiguous (and sometimes overlapping) roles between policy implementation, industry enforcement and startup monitoring, may I suggest it should be an “arbitrarium”?

Whatever, a panel of regulators (ASIC, RBA, APRA and AUSTRAC) came together at the recent FinTech Melbourne meetup to showcase what they have been working on.

First up, ASIC talked about their Innovation Hub and Sandbox, designed to accelerate the licensing process. Most of the FinTech startups engaging with the Innovation Hub are operating in marketplace lending, digital/robo advice, payment solutions and consumer credit services. Meanwhile, ASIC is seeing a growing number of enquiries from RegTech startups, and as a result, the regulator will be running a showcase event in Melbourne in the near future.

Next, the RBA gave an update on the new payments system (NPP), which will operate under the auspices of the Payments System Platform Mandate. A key aspect of this “pay anyone, anywhere, anytime” model is ISO 20022, the data standard that covers “simple addressing” as part of the payment interchange, clearing and settlement protocols. The system is due to go live later in 2017.

The biggest news came from APRA, in their role of licensing Authorised Depository Institutions (ADIs). According to APRA statistics, 26 new ADIs have been approved in the last 10 years. Most licenses come with significant conditions attached, so APRA is looking to simplify the process and encourage more competition. Similar to ASIC’s sandbox model, new entrants will be able to apply for “restricted ADI” status, under a 2-year license, with certain limitations on the size and volume of their book of business. Essentially, there will be a less onerous startup capital requirement, and the new regime is expected to be operational in the second half of 2018.

Finally, AUSTRAC gave an update on their responsibilities under the AML/CTF Act 2006. While AUSTRAC has selective oversight of FinTech startups, it has responsibility for 14,000 reporting entities, including businesses holding gambling permits. Acknowledging there is something of regulatory lag when compared to new business models and new technology, AUSTRAC pointed to the Fintel Alliance, launched earlier this year, and which may run its own pilot sandbox. Currently undertaking a legislative review and reform exercise, a key aspect of AUSTRAC’s work is undertaking product and sector risk assessment.

During the audience Q&A (including some interesting contributions from ASIC Chairman, Greg Medcraft) there was discussion of cryptocurrencies and blockchain solutions vis-a-vis the NPP, and how to address the potential conflict of laws, for example between KYC and privacy and data protection.

Next week: YBF FinTech pitch night

 

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