The Australian Securities and Investments Commission (ASIC) will allow fintechs to market-test new services without holding a licence – a move that has sparked protests from consumer groups.

The exemption allows certain services to be tested for up to a year with up to 100 retail clients, provided consumer protection conditions are met and ASIC is notified.

Commissioner John Price says the regulator is facilitating innovation while ensuring appropriate regulation and promoting good consumer outcomes.

“ASIC’s fintech licensing exemption is unique,” he said. “No other major jurisdiction has implemented a class waiver that allows eligible businesses to notify the regulator and then commence testing without an individual application process.”

ASIC has released Regulatory Guide 257 outlining Australia’s “regulatory sandbox” framework.

Mr Price says fintechs and start-ups now have more pathways to begin testing innovative services before incurring many of the regulatory costs associated with running their business.

But Choice Acting Director of Campaigns and Communications Erin Turner says the move falls short of standards set in the UK, Singapore and Hong Kong, which each assess regulatory exemption applications to ensure there is no harm to consumers.

“This is like dropping a great white shark in a kiddies’ paddling pool and sending the lifeguard home for a kip,” she said.

Financial Rights Legal Centre Acting Co-ordinator Kat Lane says it is deregulation by stealth and there is “no question” the change will hurt consumers.

“There is no requirement that unlicensed businesses must offer anything innovative or offer a service that is beneficial for consumers,” she said.