Australia is reshaping its financial innovation framework as the government moves to make it easier for FinTech businesses to test new products, services and technologies before taking them to the wider market.

The changes form part of the government’s new Financial Innovation Strategy, which aims to make Australia’s financial system more innovative and globally competitive while maintaining consumer and business confidence. As confirmed by the Australian Securities and Investments Commission (ASIC), the strategy will also establish a Financial Innovation Committee to improve coordination between government departments, regulators and industry.

A key part of the strategy is the remodelling of Australia’s Enhanced Regulatory Sandbox (ERS). The government’s review found that the existing framework had not delivered the level of flexibility or industry use needed to support financial innovation.

New sandbox to test products

Under the current system, businesses can test innovative financial products and services with regulatory safeguards in place. The model also allows regulators to gain practical insight into emerging technologies, potential barriers and areas where future policy may be required.

The government now plans to replace the existing framework with a more flexible model designed to provide a clearer path from testing to full market adoption.

Regulators will also consider targeted sandboxes for specific areas of financial innovation. These could include AI-enabled financial services and digital financial market infrastructure, providing businesses in these fields with a more focused environment to develop and test new solutions.

The changes come as Australia’s financial technology sector continues to develop across payments, financial infrastructure, lending, wealth management and regulatory technology. The government has positioned the financial system as one of the country’s key economic strengths and wants the new strategy to support further innovation without weakening the trust surrounding the sector.

For financial technology companies, the revised sandbox could provide a more practical route to test new business models and technologies under regulatory oversight. This could be particularly relevant to businesses developing infrastructure for payments, compliance, customer onboarding and cross-border financial services.

Australian FX ecosystem grows

The developments are also relevant to Australia’s foreign exchange ecosystem. The country has a sizeable and active FX market, with average daily turnover reaching $201 billion in April 2025, up 34 per cent from $150 billion in April 2022, according to the official figures from Reserve Bank of Australia. The increase took Australia’s FX market to its highest recorded level and left it as the world’s 11th-largest FX market.

Australia’s FX market remains heavily focused on institutional and financial-market activity. FX swaps made up the largest share of turnover in April 2025 at around 53 per cent, followed by spot transactions at 25 per cent and outright forwards at 18 per cent.

That structure gives FinTech innovation a potentially important role in the market, particularly where technology can improve trading infrastructure, payments, risk management, compliance and other financial operations.

For FX brokers and related technology providers, a more flexible testing environment could also make it easier to trial tools before wider deployment. Areas such as AI, digital infrastructure, payments, and compliance technology could benefit if regulators provide clearer pathways from controlled testing to commercial adoption.

The government has stressed that financial innovation should extend beyond simply adopting new technology. It also includes new products, services, business models and operating practices that can improve outcomes for consumers, businesses and the wider economy.

Analysts believe that for a mature financial market with growing FX activity, the new framework could give FinTech firms a clearer route to test, refine and eventually bring new financial solutions to market.

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