Playing in the (Fintech) Sandbox (12 Days of Fintech #8)

We get a little playful in the 8th day of 12 Days of Fintech with our look at Regulatory Sandboxes. Sandboxes are a development that has emerged in the fintech world over the past decade as governments seek to incorporate innovative new solutions into regulated environments, without generating adverse impacts on consumers or introducing systemic risks.

how can you innovate without breaking the financial system?

The tech industry operates on the rule of thumb of "Move fast and break things." When you are talking about the financial system, when you're discussing (for example) a family's ability to buy food, you definitely do not want "things to break". Which begs the question, how can you innovate without breaking the system?

Regulatory sandboxes (and related activities like the FCA, FINRA and similar Tech Sprints) provide a set of answers. With a sandbox, a safe environment is created (perhaps with sample or test data). Fintechs and regulators together can try out new technology and see how it behaves. Potential risks or issues can be identified, and remediation paths outlined. Policymakers can also use sandboxes as a tool for competitive advantage, given that multiple domiciles are seeking to attract innovative, jobs-creating companies by passing legislation that fosters a more appealing environment.

We explore the motivation, structure and examples of regulatory sandboxes in Chapter 8 of Global Fintech.

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Global Fintech: Financial Innovation in the Connected World

How the global financial services sector has been transformed by artificial intelligence, data science, and blockchain.

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The opinions in this column are my own, and do not necessarily reflect those of Imperial College Business School, Esme Learning, ADEX, or any other entity with which I am affiliated. My private investment & advisory portfolio is disclosed at?www.VisionaryFuture.com.

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Catch up on the back posts in?12 Days of Fintech!

#1 Fintech: The Convergence Revolution

#2: Edge Effects

#3: Open Banking & the API Economy

#4: Banking on the Future

#5: Upgrading Fintech Policy

#6: Reality Bites (Policy Part 2)

#7: Revolutionizing Banks