The Financial Conduct Authority (FCA) is looking for views on the merits of creating a global FinTech sandbox.
Launched in 2016, its sandbox has supported 60 firms in the UK to test their ideas with real customers in the live market under controlled conditions. The UK model reduced the time and cost of getting ideas to market, facilitated greater access to finance for innovators, enabling products to be tested and introduced to market, and ensured appropriate consumer protection safeguards according to the FCA.
Its sandbox currently only allows firms to conduct tests in the UK, but this could be about to change as “many aspects of financial markets and FinTech are global.” The FCA said, “Some firms value being able to work with other regulators to conduct tests in more than one jurisdiction. We have also observed, supported and learned from the work of many other jurisdictions in how they promote innovation in financial services.”
Having signed nine bilateral cooperation agreements with other jurisdictions, it encourages greater dialogue between regulators. However, The FAC does not currently offer firms the opportunity to participate in a joint sandbox programme with other regulators. The FCA now wants to canvass views on the merits of creating a global sandbox., which could potentially allow firms to conduct tests in different jurisdictions at the same time. It would also allow regulators to work together and identify and solve common cross-border regulatory problems, through tests.
It says it knows firms face certain regulatory problems that cross jurisdictional boundaries, for example developing solutions to anti-money laundering (AML) compliance and know your customer (KYC) onboarding, and payments services that seek to transfer money cross-border.
“The global sandbox could help regulators and firms work together to define where these common problems exist, and collaborate to find solutions. Under this approach, participating regulators could set out areas where cross-border testing would be most beneficial, and invite firms to participate in the global sandbox to propose tests to explore these. Firms would benefit from having access to support from multiple regulators in the design and supervision of their test.”
The overall approach would be to better understand and solve common regulatory problems, as well as being more helpful to firms who have aspirations to grow at scale in multiple markets according to the FCA. However, the degree to which different regulators are involved in each part of the sandbox could vary.
Given the challenges of bringing together a large group of global regulators, FCA added that longer term consideration will need to be given to creating a more flexible and practical framework for the sandbox. One option is to initially set up as an international college of regulators who have their own innovation or sandbox models.
Copyright © 2018 RegTech Analyst
Copyright © 2018 RegTech Analyst
