Fintech firms welcome regulatory pathway for new bank entrants

A group of over 180 fintech firms strongly believes the country’s financial regulator should pursue steps to ease licensing for new entrants to the banking industry.

In a submission paper to the Australian Prudential Regulation Authority (APRA), FinTech Australia agreed that APRA should utilise a “phased approach” to help potential applicants navigate the licensing process, while at the same preserving entry standards. A discussion paper by APRA released last year initially suggested the phased approach idea to stoke further competition.

“The phased approach is intended to support increased competition in the banking sector by reducing barriers for new entrants being authorised to conduct banking business, including those with innovative or otherwise non-traditional business models or those leveraging greater use of technology,” said the regulator.

APRA proposed the introduction of a restricted authorised deposit-taking institution (ADI) license that will enable applicants to obtain a licence “while still developing the full range of resources and capabilities necessary to meet the prudential framework.”

In its submission paper, Fintech Australia welcomed APRA’s proposals but also suggested several changes. Among other things, it called on the regulator to provide further clarification and guidance regarding activities that they view as being “low risk” as opposed to “high risk”.

“This is of particular note given some fintech startups may wish to also use this pathway to obtain an ADI license for low-risk activities, for example gaining access to Payments infrastructure to provide payments, without intending to offer riskier lending products,” it said.

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Source: Fintech firms welcome regulatory pathway for new bank entrants – AustralianBroker