Regulatory Sandbox

An inviting playground for FinTechs, with more likely to be opening soon

Do you remember those summer days when you were playing in the sand at home or around a friend’s house building sand castles, testing new forms and shapes for hours – be it in a sand box, a sand table or a sand pit? Well, there is one sector which is now being invited to go back to playtime and build and test their products and services in the sandbox: FinTechs. So what are they doing?

Countries and cities are increasingly trying to attract FinTechs by creating so called Sandboxes. A Regulatory Sandbox can be best described as a secure environment in which FinTech start-ups and established companies can test new and innovative solutions in a real life environment, allowing them to run pilots on a limited basis without the need for a full commercial roll-out or secure full regulatory approval. These initiatives allow start-ups to test new technology, innovative products or services and even business models in a safe environment with more relaxed regulatory rules. Australia, Singapore and the UK are some examples of countries proactively offering Regulatory Sandboxes to FinTechs.

In Australia, for example, companies can apply for the Sandbox which allows them to test and trial financial services with up to a maximum of 100 retail clients for a six month window. Most sandbox models also offer a mentoring and consulting service with individual guidance for companies with ideas that do not fit into the existing regulatory frameworks.

These sandboxes are not only seen as a useful way for FinTechs to test and trial new solutions but also for countries and cities to attract new start-ups. They are also seen as a successful tool to promote disruptive ideas and to allow FinTechs to securely play with innovative ideas before leaving the playground and showing off their sandcastles in the ‘real world’ environment.