With FinTechs taking the financial services industry by storm, the last year or so has seen regulators scramble to set up regulatory sandboxes to balance the innovation onslaught with prudent risk management and consumer protection. But not every market will need such an arena for startups, said panellists at the recent Singapore FinTech Festival.
Mr Richard Teng, CEO of the Financial Services Regulatory Authority, Abu Dhabi Global Market (ADGM), noted four key themes of emerging sandboxes: 1) regulators who have taken proactive steps to create an environment for startups to flourish; 2) regulators who have not developed any regulation in relation to FinTech; 3) jurisdictions which have started sandboxes as a result of neighbouring markets’ activities; and 4) countries without sandboxes but where FinTech is booming.
China, he said, was one market that may not particularly require a sandbox because the entire country is essentially one giant FinTech sandbox. Meanwhile in the US, where rules may differ from state to state, the creation of sandboxes for separate jurisdictions could in fact end up cumbersome to innovative developments.
That being said, there is consensus that regulatory sandboxes have their benefits in leading to market competitiveness, attracting investments, as well as promoting financial inclusion and building up market infrastructure; there are 23 (and counting) regulatory sandboxes that have been set up thus far.
While panellists noted that different countries conduct their sandboxes in different ways, Mr Buncha Manoonkunchai, Senior Director of the Financial Technology Group at the Bank of Thailand, emphasised that the Kingdom’s model also served an important purpose and opportunity for government to learn from, adapt, and work with innovators. Likewise, these startups will be able to learn how the financial services industry is governed, and understand how to test and tweak their businesses in line with best practices and rules.
Global standards
The panel – which included Mr Mark Adams, Senior Executive Leader of Strategic Intelligence at the Australian Securities and Investments Commission (ASIC), and Ms Mirel ter Braak, Senior Policy Adviser at the Netherlands Authority for Financial Markets – also touched on the issue of an internationally recognised set of FinTech standards that regulators could adhere to so as to facilitate greater collaboration in innovations across countries. On this, Mr Adams noted two tracks: regulatory, and technology or services standards. He added that while regulatory standards should be set by industry authorities and provide for consumer protection, technology standards need to be set by the industry, rather than by regulators.
In reality however, Mr Teng said the development of an international benchmark will take some time to come about, given different objectives and characteristics in every market. But for a start, he cited Singapore’s example, in which the Monetary Authority of Singapore has introduced bilateral protocols and bridges to create bigger markets to connect FinTech players with the industry. A