FinTech Sandbox Australia in 2025

The Corporations (FinTech Sandbox Australian Financial Services Licence Exemption) Regulations 2020 (“FinTech Sandbox Regulations”) create a streamlined pathway for eligible FinTech businesses to test new financial products and services in Australia without holding an Australian Financial Services Licence (AFSL). Below, we highlight the key points of the FinTech Sandbox Regulations, including eligibility requirements, conditions, and how businesses can benefit from this temporary exemption.

What Is the FinTech Sandbox?

The FinTech Sandbox is an initiative under the Corporations Act 2001 (as amended) that allows eligible businesses to trial innovative financial products and services in a live market environment. The aim is to encourage development and competition in Australia’s financial services sector while ensuring appropriate consumer safeguards remain in place.

Key Updates: The current compilation, which took effect on 26 October 2024, incorporates amendments up until this date.  Businesses relying on older versions should ensure they are aware of these important updates.

Who Can Access the Exemption?

To rely on the FinTech Sandbox Regulations, a provider must be an ‘eligible person’. Broadly, this excludes:

• Holders of an existing AFSL for the service being tested.
• Authorised representatives of an existing AFSL holder.
• Related bodies corporate of AFSL holders or market operators.
• Non-residents (i.e. someone who is neither an Australian citizen nor a permanent resident).

Additionally, any foreign company must be registered under the relevant Corporations Act provisions.

Important Note: Only one member of a corporate group may rely on the Sandbox at any given time. If another related body corporate is already using this exemption (or the equivalent credit licence exemption under the National Consumer Credit Protection regime), further applications within the group may not be accepted.

Scope of Services Eligible for Testing

Eligible financial services include:

• Providing financial product advice on certain products.
• Applying for or acquiring certain financial products.
• Issuing, varying, or disposing of non-cash payment facilities.
• Arranging for the issuing, varying, or disposing of a financial product.
• Providing crowd-funding services.

Certain insurance, superannuation, and deposit-taking products may also be offered to retail clients under specific conditions. Derivatives and margin lending facilities, however, may only be provided to wholesale clients within the Sandbox.

Conditions and Limits

1. Notification and ASIC Approval

Before commencing, the provider must submit a notification to ASIC in the prescribed form. If ASIC does not issue a decision to the contrary within 30 days, the testing period begins.

2. 24-Month Testing Period

Once approved, providers generally have up to 24 months to test their product or service. The exemption may cease earlier if certain conditions are breached.

3. Exposure Limits

• Retail Client Investment Cap: Each retail client can commit a maximum of AUD $10,000 to tested products (with exceptions for products like eligible general insurance, life insurance, deposit products offered by ADIs, and certain superannuation products).
• Overall Cap: Across retail and wholesale clients, total exposure (premiums, contributions, commitments, etc.) must not exceed AUD $5 million for all products tested under the Sandbox and any equivalent credit licence exemption.

4. Client Notifications

Providers must inform clients upfront:

• That they do not hold an AFSL or act under one.
• That certain regulatory safeguards associated with licensed financial services do not apply.
• Of any key changes, including ceasing to rely on the exemption or modifying the financial product being offered.

5. Obligations and Protections

Providers must:

• Maintain internal dispute resolution procedures aligned with ASIC requirements.
• Be a member of the Australian Financial Complaints Authority (AFCA).
• Hold adequate professional indemnity insurance.
• Comply with best interests' obligations, client money rules, financial product disclosure obligations, and ensure Statements of Advice are provided where personal advice is given to retail clients.

When Does the Exemption End Early?

The exemption can end before the 24-month window if:

• Providers exceed client exposure caps.
• ASIC cancels the exemption due to breaches of conditions or concerns about consumer detriment.
• The provider voluntarily notifies ASIC of withdrawal.
• The provider obtains an AFSL or becomes an authorised representative of an AFSL holder, automatically disqualifying them as an eligible person.

Why the FinTech Sandbox Matters

The FinTech Sandbox Exemption helps foster innovation by reducing red tape for emerging financial service providers. It allows real-world testing of novel services without incurring the full cost and complexity of obtaining a licence at the outset. For consumers, it maintains a framework of protections and oversight from ASIC, ensuring a balance between fostering innovation and safeguarding market integrity.

Next Steps for FinTech Innovators

If your FinTech startup or established business wants to access the Sandbox, consider:

1. Assessing Eligibility: Confirm you (or your corporate group) meet the “eligible person” criteria.
2. Completing the Notification: Prepare a detailed proposal justifying the benefit to the public and outlining how your product/service is new or an improvement on existing services.
3. Implementing Safeguards: Set up proper dispute resolution, ensure insurance cover, and meet disclosure requirements.

Need Legal Advice?

Our firm has a dedicated FinTech practice that can help you navigate the complexities of the Corporations (FinTech Sandbox Australian Financial Services Licence Exemption) Regulations 2020. From initial eligibility assessments to ongoing compliance, we can ensure your business is positioned for success in Australia’s rapidly evolving FinTech landscape.

Disclaimer

This article is intended for general information only and is not legal advice. For personalised assistance, please contact our experienced FinTech lawyers.