DFSA proposes innovation testing licences
Dubai Financial Services Authority (DFSA) has issued a new consultation paper to find the ways to avoid creating a standalone regime to facilitate fintech companies. Instead, keeping in line with practices followed in the UK and Australia, DFSA will review innovative fintech business propositions and match them with applicable rules already prevailing in the region.
The review, which will result in the grant of an innovation testing licence, involves picking out various DFSA rules that would ordinarily be applicable to the proposition, and determining if some need to be waived or modified, to support the new business.
Here are the criteria for fintech firms to qualify for the licence:
- The innovative business proposition must involve the use of financial technology.
- The business proposition must involve an activity that, if conducted in or from Dubai International Financial Centre (DIFC), would involve the carrying out of one or more financial services regulated by DFSA.
- The development of the idea must have reached the stage where it is necessary to carry out “live” testing with customers (whether other businesses or consumers).
- If tested successfully, the firm must intend to implement its business proposition, model, service or product more widely, in or from DIFC.
DIFC also suggests a four-stage application process:
1. Welcome and exploratory stage:
- Establish contact with the DIFC Authority (DIFCA) and DFSA.
- Initiate discussions with DFSA regarding regulatory requirements for the fintech business.
2. Application stage:
- Apply for a DFSA financial services licence (innovative testing licence) and commence DIFCA registration.
- If accepted, the DFSA will issue the licence.
3. Testing phase:
- Test the financial service in line with the parameters set by the DFSA.
4. Completion stage:
- Send the results of the testing phase to the DFSA.
- Request for approval to progress to an unrestricted financial services licence or discuss an exit strategy.
DFSA is seeking comments from anyone who is interested in operating, investing in, or providing services to fintech businesses in DIFC. This can be done via email with “CP112″ in the subject line. Comments should be submitted by 5 April 2017.
By Soumik Roy, editorial contributor to Banking Technology