ASIC Innovation Hub: Comprehensive Guide for Fintechs

Fintech businesses often face regulatory questions before their product is ready to launch. A payments app may need to determine whether it involves a non-cash payment facility, an investment platform may need authorisations, while a lending or embedded finance product may raise Australian Credit Licence requirements.

The Australian Securities and Investments Commission‘s (ASIC) Innovation Hub gives eligible fintech and regtech businesses a way to engage with ASIC early and obtain informal assistance about Australia’s financial services and credit regulatory frameworks.

In this article, we explain how fintech businesses can use the ASIC Innovation Hub, what assistance the Hub provides, how to prepare an effective submission, and how it can help identify licensing and regulatory issues before launch.

Interactive Tool: Check Your Eligibility & Readiness for the ASIC Innovation Hub

What Is the ASIC Innovation Hub?

ASIC established the Innovation Hub in 2015 to help innovative fintech and regtech businesses navigate Australia’s regulatory framework.

For fintech founders, the Hub can be useful where the product has progressed beyond an initial concept, but there is uncertainty about questions such as:

• whether an Australian Financial Services Licence (AFSL) may be required;
• whether an Australian Credit Licence (ACL) applies;
• which AFSL authorisations may be relevant;
• whether a product feature could constitute financial product advice or dealing;
• whether a payments model involves a regulated financial product;
• how ASIC’s licensing process operates; or
• whether the Enhanced Regulatory Sandbox may be available.

The Hub provides informal regulatory assistance, not legal advice. ASIC will not determine the legal position for your fintech, certify the product as compliant or guarantee that a licence or regulatory relief will be granted.

Its value is therefore greatest when the fintech has already identified the relevant regulatory issue and wants to understand how ASIC administers the framework.

Which Fintechs Can Use the Innovation Hub?

ASIC’s current eligibility criteria can cover fintech startups, scaleups and established businesses developing innovative financial products or services.

For fintech applicants, ASIC generally looks for a business that:

• is developing, facilitating or providing an innovative fintech product or service;
• can potentially produce better outcomes for investors, consumers or financial markets; and
• requires an AFSL or ACL, is applying for one, or has held the relevant licence for less than 12 months.

ASIC gives preference to business models that are genuinely new or significantly different from products and services already available.

This can make the Hub particularly relevant to fintechs involving:

• digital payments and wallets;
• investment and trading platforms;
• robo-advice;
• embedded finance;
• digital lending;
• digital assets;
• wealthtech;
• insurtech;
• crowdfunding;
• automated financial product comparison;
• custody technology; and
• other technology-enabled financial services.

Being technologically sophisticated is not enough by itself. ASIC may also consider whether the model is innovative from a financial services perspective and whether the business has provided enough detail for meaningful regulatory engagement.

What Can the Innovation Hub Help a Fintech With?

Identifying Potential Licensing Issues

The Innovation Hub can help fintechs understand the regulatory issues that may affect their proposed business model and how ASIC administers the relevant licensing frameworks. One of the most useful functions of the Hub is helping fintechs identify areas that may require closer regulatory analysis.

For example:

• A trading app may need to consider whether it is dealing in or arranging transactions in financial products.
• A robo-advice platform may need to determine whether its algorithm provides general or personal financial product advice.
• A digital wallet may need to consider whether it constitutes or involves a non-cash payment facility.
• A lending platform may need to determine whether credit licensing requirements apply.
• An embedded finance provider may need to identify which entity in the commercial chain is actually providing the regulated service.
• A digital asset platform may need to determine whether particular assets or services fall within Australia’s financial services framework.

ASIC can provide informal assistance about how it administers these regulatory frameworks and flag issues the business should examine further. It will not, however, provide a binding legal determination that a particular product does or does not require a licence.

Understanding AFSL & ACL Pathways

A fintech may know that regulation applies, but still need to work out how it should enter the regulatory framework.

The Innovation Hub can explain ASIC’s administration of pathways such as:

• obtaining an AFSL;
• obtaining an ACL;
• varying an existing licence;
• operating under an authorised representative arrangement;
• applying for regulatory relief; or
• testing an eligible product through the Enhanced Regulatory Sandbox.

For an early-stage fintech, understanding these pathways can materially affect the launch strategy.

For example, obtaining a fintech’s own AFSL may provide greater long-term control but involve a more substantial licensing and compliance framework. Operating initially as an authorised representative may provide another pathway where legally and commercially appropriate.

Identifying Issues Before Product Launch

Regulatory questions are often easiest to address before a product has been fully built or launched.

Suppose a fintech’s proposed customer journey involves:

• asking users about their investment objectives;
• automatically recommending a portfolio;
• arranging the acquisition of investments; and
• holding assets through a custody structure.

That single platform may raise multiple regulatory questions involving financial product advice, dealing, and custody.

Identifying these issues early may allow the fintech to alter its product architecture, customer journey or third-party arrangements before committing significant development resources. This is one of the practical advantages of approaching the Innovation Hub during product development rather than after launch.

How Should a Fintech Submit an Innovation Hub Request?

Where to Submit the Request

ASIC currently directs businesses seeking informal assistance to complete its Innovation Hub assistance request form. The Innovation Hub can also be contacted at [email protected] for questions.

The submission should allow ASIC to understand the fintech’s product without requiring the regulator to reconstruct the business model from technical or marketing material.

Explain How the Fintech Actually Works

Start with a plain-English description of the customer journey.

ASIC should be able to understand:

• what the customer signs up for;
• what the customer can do through the platform;
• which entity contracts with the customer;
• which entity handles or holds funds or assets;
• which third parties are involved;
• how transactions occur; and
• how the fintech earns revenue.

Avoid describing the business solely through labels such as “AI wealth platform”, “embedded finance infrastructure” or “Web3 payments ecosystem”. Those descriptions may be commercially useful, but often say little about the regulatory position.

Identify Your Customers

Explain who will use the product. Relevant distinctions may include:

• retail clients;
• wholesale clients;
• consumers;
• SMEs;
• financial institutions; or
• other fintech businesses.

Customer classification can materially affect regulatory obligations, including disclosure, advice and consumer protection requirements.

Map the Other Businesses in the Product

Many fintech products rely on multiple regulated entities. For example, a fintech may:

• use an AFSL holder to execute investments;
• partner with a bank to hold customer money;
• use a custodian to hold financial products;
• rely on a credit licensee for lending;
• use a payment processor for transactions; or
• distribute a product issued by another business.

Your submission should make the role of each entity clear. A simple transaction or product-flow diagram may be particularly useful.

Ask Specific Regulatory Questions

The Innovation Hub is more useful when the question is narrow.

Instead of asking:

“What licence does our fintech need?”

frame the issue around the particular feature causing uncertainty.

For example:

“Our platform collects information about a user’s investment objectives and automatically recommends one of five portfolios. Could this functionality involve financial product advice under Section 766B of the Corporations Act 2001 (Cth)?”

Or:

“Our app does not execute securities transactions but sends customer orders to an AFSL-licensed broker. Does ASIC consider our role relevant to the arranging limb of dealing under Section 766C?”

These questions give ASIC a defined regulatory issue to address.

Explain What You Have Already Considered

Your submission should also explain the business’s current regulatory analysis. This might include:

• provisions of the Corporations Act 2001 (Cth) you have considered;
• ASIC regulatory guidance reviewed;
• the AFSL authorisations you believe may be required;
• advice already obtained;
• exemptions or representative structures considered; and
• the particular issue that remains unresolved.

The objective is not to ask ASIC to perform the entire legal analysis for the fintech.

What Can & Can’t the ASIC Innovation Hub Do for Your Fintech?

The Innovation Hub Can Help With

Fintech founders should manage expectations about what engaging with the Innovation Hub achieves. The Innovation Hub can:

• explain financial services and credit regulatory obligations in plain English;
• explain how ASIC administers AFSL and credit licensing;
• flag potential licensing issues arising from a fintech model;
• discuss regulatory issues during the licence application process;
• refer the fintech to specialist ASIC teams;
• explain the Enhanced Regulatory Sandbox and regulatory relief pathways; and
• refer eligible Australian fintechs to certain overseas regulators.

The Innovation Hub Cannot

The Innovation Hub cannot:

• provide formal legal advice;
• give a binding ruling about whether a licence is required;
• certify that a fintech is compliant;
• endorse the product or business;
• guarantee an AFSL or credit licence;
• guarantee regulatory relief;
• provide funding; or
• replace qualified Australian legal advice.

ASIC also warns businesses not to imply that receiving Innovation Hub assistance means ASIC has approved or endorsed the fintech.

Enhanced Regulatory Sandbox Work for Fintechs

What is the Enhanced Regulatory Sandbox?

The Enhanced Regulatory Sandbox (ERS) provides a separate framework through which eligible businesses may test certain financial services or credit activities without first obtaining an AFSL or ACL.

The Innovation Hub administers the ERS and can provide informal assistance about how it operates.

What Can a Fintech Test?

The ERS is designed for limited testing of eligible innovative financial services and credit activities. Testing can generally continue for up to 24 months, subject to the applicable conditions.

The framework also includes restrictions on:

• eligible financial products and services;
• customer exposure;
• total exposure across the testing business; and
• the activities that can be performed without a licence.

Fintechs must satisfy both the innovation test and the net public benefit test before relying on the exemption.

This means the sandbox is not simply a general “startup exemption” from financial services regulation.

Does the Sandbox Remove All Regulatory Obligations?

Even where a fintech can rely on the ERS licensing exemption, other obligations can continue to apply. Depending on the business, these can include:

• misleading or deceptive conduct laws;
• design and distribution obligations;
• privacy obligations;
• AML/CTF requirements;
• dispute resolution requirements; and
• professional indemnity insurance requirements.

The sandbox therefore provides limited licensing relief, not a regulation-free environment.

What Happens After the Innovation Hub Responds?

The Innovation Hub’s response may reveal that the fintech needs to make further regulatory decisions before launch. Depending on the issues identified, the fintech may need to:

• redesign a product feature;
• restructure the customer journey;
• change which entity performs a regulated activity;
• operate as an authorised representative;
• apply for an AFSL;
• apply for an ACL;
• seek an AFSL variation;
• consider regulatory relief; or
• investigate eligibility for the Enhanced Regulatory Sandbox.

This is why Innovation Hub engagement can be particularly valuable during product development. A licensing issue identified after thousands of customers have already onboarded can be significantly more difficult to address than one identified while the product architecture is still flexible.

Conclusion

ASIC’s Innovation Hub can be a useful resource for fintechs trying to navigate financial services and credit regulation while developing a new product.

Its greatest value lies in helping businesses engage with ASIC early, understand how the regulator administers the relevant framework and identify issues that may affect licensing or product design before launch.

However, the Hub does not provide legal advice or regulatory approval. Financial services lawyers for fintech businesses at Click Legal can help fintech businesses map their product against the relevant regulatory framework. They can identify the questions to raise with the Innovation Hub, prepare an effective submission, and determine the appropriate licensing or authorisation pathway.

Frequently Asked Questions