Lessons learnt from HashChing
Claire Wivell Plater
Even fintech providers that don’t offer direct financial advice to consumers may need an Australian Financial Services Licence (AFSL) or Australian Credit Licence (ACL), according to The Fold Legal (The Fold).
The Fold managing director Clare Wivell Plater said, “We recently supported HashChing to respond to concerns raised by ASIC. There are lessons to be learnt from HashChing’s experience.”
HashChing is Australia’s first home loan deals aggregator site. Within three weeks of launch, it received a letter from ASIC asking questions about whether it was providing a financial or credit service without a licence.
Before launch, the founders had researched credit and financial services and believed they didn’t need a licence.
“Unbeknown to HashChing, as a referral service, a somewhat obscure regulation required it to hold an ACL and AFS licence,” Ms Wivell Plater said.
ASIC worked collaboratively with HashChing and The Fold to rectify the problem. “Because HashChing responded promptly, sought professional advice and rectified the issue by taking down and amending its website, and becoming a credit representative of an appropriate licensee, ASIC didn’t even require a formal response to its letter.”
Ms Wivell Plater said it’s a challenge for fintech founders to interpret the jargon and intricacy of the regulatory requirements and because fintech business models are innovative and different, the available guidance is often not readily applicable to them. “Unfortunately, HashChing discovered the hard way that although some guidance can be obtained from ASIC’s website, the complexity of the financial and credit regulatory regimes requirements mean that specialist advice is required.”
Another common mistake fintech businesses frequently make is to emulate similar online services on the assumption that they’re compliant. But as financial and credit services are subject to much more stringent and detailed regulatory regime than other online businesses, such comparisons are not safe.
“The cost of complying with such a significant and complicated legislative regime is a very real impediment to start-ups who need to be both thorough enough to stay out of trouble but nimble enough to succeed,” she said. “Our advice to start-ups is do your research, but make sure you test your understanding of the requirements with an expert.”
Ms. Wivell Plater said the most encouraging thing about this story is ASIC’s response. “Reflecting ASIC’s commitment to facilitate start-ups and fintech businesses to navigate the regulatory system, it dealt with HashChing’s matter sensitively and courteously. Although not established at the time, this is an excellent example of how ASIC’s fintech innovation initiatives might work effectively with start-ups.”
