What should the booming Australian FinTech market know in terms of regulation?

By Discover Media|16 October 2019

Provided by Discover Media.

Australia is currently examining the wealth of opportunities the burgeoning FinTech market represents. A dedicated committee has been established to conduct a year-long assessment of how competitive Australia is regarding fintech, and where the relevant opportunities, risks and future trends lie. The new committee will report back its findings in October 2020. Growth in Fintech is currently strong in Australia and investors/people might want to have the complete fintech guide to help maximise on the opportunities this market now represents and to be aware of all the regulations currently impacting the industry.

Australia is fast becoming a refuge for Asian fintech companies, who want to escape heavy regulatory laws which make operating in locations such as China difficult. Although Hong Kong has fewer regulatory hurdles to jump through, the current protests, political unrest and uncertain landscape make it a less attractive option.

Other nearby countries also pose challenges. Taiwan is not a good option due to the influence China has on it, and other Asian countries have heavy tax constraints. This means companies are looking to base themselves further afield, with Australia posing an attractive proposition, due to its skilled labour force and cheaper real estate.

Awareness of FinTech among Australians is comparatively low though. The adoption rate of FinTech in Australia is 58%, some 6% less than the average globally. The key reason for this lack of take up may be the stronghold the big four – ANZ, Westpac, Commonwealth Bank and NAB – have, representing 95% of the Australian banking market. Investment in FinTech in Australia has also dropped significantly, from $131m to just $11m.

While there is clearly considerable untapped potential in Australian markets, there are some laws and regulatory hurdles FinTech need to overcome. Firstly, they would need to be registered with ASIC (Australian Securities and Investments Committee). Financial service providers also need to have the necessary disclosure, registration and licensing in place. They must also adhere to the AML/CTF (Anti-Money Laundering and Counter Terrorism Financing) requirements.

Until recently, it was possible for overseas providers of financial services to provide wholesale services via an ASIC passport, which relieves providers from having an AFSL (Australian Financial Services License). The requirements have recently changed though, meaning Foreign Financial Service Providers now need to hold a foreign AFSL.

FinTech that engage in peer-to-peer lending need to hold an ACL (Australian Credit License) while those that buy and sell products via an exchange would need to meet AML (Anti-Money Laundering) requirements.  Companies with a turnover of over $3m that handle customer data would need to adhere to the Privacy Act 1988, as well as the Notifiable Data Breaches scheme 2018.

Sounds complicated, however, regulators in Australia are committed to helping overseas FinTechnavigate the system. Innovation Hubs have been established to help organisations understand the Australian regulatory requirements.

It is also possible for FinTech to claim generous tax incentives for certain research and development activities in Australia. Small businesses with a turnover of less than $20m Australian dollars can claim 43.5% tax offset, while other larger companies can claim a non-refundable 38.5% tax offset on spending up to $100m Australian dollars and $30% on amounts over this threshold.

Despite some red tape, Australia is doing a lot to support foreign FinTech and encourage growth in this market, making it an attractive prospect for fintech providers.

What should the booming Australian FinTech market know in terms of regulation?
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