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Australian Government "Enhanced Regulatory Sandbox"

Updated: Sep 28, 2022

The Australian Government's Enhanced Regulatory Sandbox (ERS) lets FinTechs test unlicensed, innovative financial products in a protected regulatory environment.

Launched by the Australian Securities and Investments Commission (ASIC) on September 1, 2020, the ERS supersedes the previous regulatory sandbox introduced in 2016.

ASIC Commissioner Cathie Armour says the regulator's ERS guidance will help businesses understand how the new sandbox works, including their obligations to consumers, how it may be applicable to them and how they can apply to use it.

FinTechs can take advantage of the ASIC sandbox environment not only for testing products, but for creating relationships with industry regulators that help them transition to fully-licensed trading.

Advantages of the Enhanced Regulatory Sandbox

Many ERS access requirements are similar to those that all FinTechs need to operate in the Australian financial market. However, the ERS allows businesses to offer innovative financial services or credit activities without first obtaining an Australian Financial Services Licence or Australian Credit Licence. It differs from the previous sandbox by:

  • Allowing licensed businesses to test new services they are currently not authorised to provide.

  • Permitting a testing timeframe of up to 24 months.

  • Placing no limit on certain products issued by an entity regulated by the Australian Prudential Regulation Authority (APRA), such as general and life insurance, superannuation, deposits and non-cash payments.

  • Allowing businesses to use the sandbox multiple times to test different services and activities for which they do not have a licence, and have not already tested.

A comprehensive comparison between the ERS and the original sandbox can be found here.

Requirements for using the ERS

Innovation and differentiation are key for any business looking to use the ERS environment. Applicants who wish to use the ERS must:

  • Justify why an exemption for their proposed financial services will result in a benefit to the public; and

  • Explain why their proposed financial services are new or different compared to what is now available in the Australian market.

In addition, the product must not have been previously tested, either in the ERS or its predecessor. There must be a $10,000 individual limit on the value of certain financial services that can be offered to retail clients. The applicant’s total customer exposure must be no more than $5 million.

ASIC has 30 calendar days to assess a notification to rely on the ERS exemption. In practice, ASIC intention is to write to the notifier within this period to advise whether or not they are able to rely on the ERS exemption.

If ASIC does not respond within the 30-day period, then the exemption is taken to start on the 31st day after the notification lodgement date.

Support for the ERS application process

Applying for the ERS, with its many stipulations, takes time and distracts from the core business of financial service providers. To ease the additional workload, Gen Advisory offers specialised services to ADIs and FinTechs, including support for FinTech businesses contemplating the ERS for financial product testing. Gen Advisory can assist with:

  • Applying for a licence or operating under a licence holder.

  • Enrolling with the AFCA.

  • Preparing documents and information for the ERS application.

  • Assistance with ‘Proof form 000’.

  • Guidance while operating within the ERS.

  • Support when moving out of the ERS into full licensing.

This ERS infographic outlines key points of the new system. For a confidential discussion about whether your FinTech business could qualify for the ERS - including how Australia's ERS compares with those of selected overseas jurisdictions - contact the Gen Advisory on +61-2-8088 0744.



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