Regulatory Sandboxes: The Road to Fintech Redemption?
- The race is on, and it's clear that the consumer will be the greatest beneficiary.
This article was written by Abraham Tachjian, a Singapore based lawyer with expertise in capital markets and financial services.
A race is under way. Spurred by the initiatives of the UK’s Financial Conduct Authority, countries are embarking on missions to establish themselves as the preeminent jurisdiction for all things Fintech Fintech Financial Technology (fintech) is defined as ay technology that is geared towards automating and enhancing the delivery and application of financial services. The origin of the term fintechs can be traced back to the 1990s where it was primarily used as a back-end system technology for renowned financial institutions. However, it has since grown outside the business sector with an increased focus upon consumer services.What Purpose Do Fintechs Serve?The main purpose of fintechs would be to suppl Financial Technology (fintech) is defined as ay technology that is geared towards automating and enhancing the delivery and application of financial services. The origin of the term fintechs can be traced back to the 1990s where it was primarily used as a back-end system technology for renowned financial institutions. However, it has since grown outside the business sector with an increased focus upon consumer services.What Purpose Do Fintechs Serve?The main purpose of fintechs would be to suppl Read this Term.
The source of their motivation isn’t difficult to identify. Financial institutions, traditional bellwethers of economic growth, have faced headwinds spanning from tepid markets to greater regulatory oversight. Revenue streams have been affected, hiring reduced and wages frozen.
Despite these challenges, fintech startups have enjoyed notoriety and success. Whether by addressing pain points in the typical banking relationship or delivering services in a faster or more cost efficient manner, the growth of these companies has been remarkable. So much so that regulators have sought to become nurturing partners through a laissez-faire regulatory model and other initiatives.
Chief among these has been the regulatory sandbox. In recent months, countries such Abu Dhabi, Australia, Hong Kong and Singapore have all announced intentions to launch one. Though specifics vary, the programs share a common theme of promoting the growth of fintech within their borders.
This is accomplished by allowing applicants, which may include startups and financial institutions alike, to test their products in a controlled environment where compliance Obligations Obligations In finance, an obligation is a financial responsibility where the terms of a contract must be met. Should an obligation between parties fail then the party who is at default may face legal action. In this scenario, the guilty party will not only have to agree to pay the set amount to fulfill the contractual arrangement but may also be responsible for covering all legal proceedings cost. Routine payments or outstanding debt of any kind are considered financial obligations, so if someone owes you In finance, an obligation is a financial responsibility where the terms of a contract must be met. Should an obligation between parties fail then the party who is at default may face legal action. In this scenario, the guilty party will not only have to agree to pay the set amount to fulfill the contractual arrangement but may also be responsible for covering all legal proceedings cost. Routine payments or outstanding debt of any kind are considered financial obligations, so if someone owes you Read this Term are 'relaxed'. At the end of the term, the product is expected to exit the program and be deployed to the public in full compliance with all regulations.
The allure of the sandbox is clear. From a global perspective, program adopters demonstrate their commitment to innovation and developing a local fintech ecosystem. Similarly, participants have the opportunity to test and fine tune their ideas in forgiving environments.
This may also encourage them to push the boundaries of innovation. Consumers ultimately benefit through new financial products offering greater choice and competition between incumbents and startups.
The proliferation of these programs presents challenges and opportunities. Firstly, a degree of cooperation among regulators is advisable in order to avoid jurisdictional arbitrage. For instance, a startup refused entry into one sandbox may attempt to participate in another by taking advantage of differing admission requirements.
Additionally, regulators must ensure that their staff are well versed not only in legal and regulatory requirements, but technical ones as well. This ensures that the vetting process for admission is sufficiently thorough. What’s more, advising potential candidates of the types of products that the regulator would like to see deployed may lead to a more focused applicant pool as well as an opportunity for the jurisdiction to distinguish itself by developing a technological expertise.
The race is on. Though countries may present themselves as the potential winners, it is clear that the consumer will be the greatest beneficiary of these efforts.
This article was written by Abraham Tachjian, a Singapore based lawyer with expertise in capital markets and financial services.
A race is under way. Spurred by the initiatives of the UK’s Financial Conduct Authority, countries are embarking on missions to establish themselves as the preeminent jurisdiction for all things Fintech Fintech Financial Technology (fintech) is defined as ay technology that is geared towards automating and enhancing the delivery and application of financial services. The origin of the term fintechs can be traced back to the 1990s where it was primarily used as a back-end system technology for renowned financial institutions. However, it has since grown outside the business sector with an increased focus upon consumer services.What Purpose Do Fintechs Serve?The main purpose of fintechs would be to suppl Financial Technology (fintech) is defined as ay technology that is geared towards automating and enhancing the delivery and application of financial services. The origin of the term fintechs can be traced back to the 1990s where it was primarily used as a back-end system technology for renowned financial institutions. However, it has since grown outside the business sector with an increased focus upon consumer services.What Purpose Do Fintechs Serve?The main purpose of fintechs would be to suppl Read this Term.
The source of their motivation isn’t difficult to identify. Financial institutions, traditional bellwethers of economic growth, have faced headwinds spanning from tepid markets to greater regulatory oversight. Revenue streams have been affected, hiring reduced and wages frozen.
Despite these challenges, fintech startups have enjoyed notoriety and success. Whether by addressing pain points in the typical banking relationship or delivering services in a faster or more cost efficient manner, the growth of these companies has been remarkable. So much so that regulators have sought to become nurturing partners through a laissez-faire regulatory model and other initiatives.
Chief among these has been the regulatory sandbox. In recent months, countries such Abu Dhabi, Australia, Hong Kong and Singapore have all announced intentions to launch one. Though specifics vary, the programs share a common theme of promoting the growth of fintech within their borders.
This is accomplished by allowing applicants, which may include startups and financial institutions alike, to test their products in a controlled environment where compliance Obligations Obligations In finance, an obligation is a financial responsibility where the terms of a contract must be met. Should an obligation between parties fail then the party who is at default may face legal action. In this scenario, the guilty party will not only have to agree to pay the set amount to fulfill the contractual arrangement but may also be responsible for covering all legal proceedings cost. Routine payments or outstanding debt of any kind are considered financial obligations, so if someone owes you In finance, an obligation is a financial responsibility where the terms of a contract must be met. Should an obligation between parties fail then the party who is at default may face legal action. In this scenario, the guilty party will not only have to agree to pay the set amount to fulfill the contractual arrangement but may also be responsible for covering all legal proceedings cost. Routine payments or outstanding debt of any kind are considered financial obligations, so if someone owes you Read this Term are 'relaxed'. At the end of the term, the product is expected to exit the program and be deployed to the public in full compliance with all regulations.
The allure of the sandbox is clear. From a global perspective, program adopters demonstrate their commitment to innovation and developing a local fintech ecosystem. Similarly, participants have the opportunity to test and fine tune their ideas in forgiving environments.
This may also encourage them to push the boundaries of innovation. Consumers ultimately benefit through new financial products offering greater choice and competition between incumbents and startups.
The proliferation of these programs presents challenges and opportunities. Firstly, a degree of cooperation among regulators is advisable in order to avoid jurisdictional arbitrage. For instance, a startup refused entry into one sandbox may attempt to participate in another by taking advantage of differing admission requirements.
Additionally, regulators must ensure that their staff are well versed not only in legal and regulatory requirements, but technical ones as well. This ensures that the vetting process for admission is sufficiently thorough. What’s more, advising potential candidates of the types of products that the regulator would like to see deployed may lead to a more focused applicant pool as well as an opportunity for the jurisdiction to distinguish itself by developing a technological expertise.
The race is on. Though countries may present themselves as the potential winners, it is clear that the consumer will be the greatest beneficiary of these efforts.