Regulators from the U.K., U.S. and Hong Kong announced on Tuesday (Aug. 7) a new alliance aimed at encouraging the growth of FinTechs.
According to a report in Financial Times, citing the U.K. Financial Conduct Authority (FCA), the new alliance – dubbed the Global Financial Innovation Network – is part of the FCA’s aim to create a global sandbox that will allow companies to test innovative products with regulatory authorities on a temporary basis. It is seen as a way to reduce the time and costs associated with getting products in the marketplace, and is also aimed at helping startups raise funding.
The U.K. is among the first countries to introduce a FinTech sandbox, and now it wants to expand the effort. The Global Financial Innovation Network will be made up of 11 other regulators, including the U.S. Bureau of Consumer Financial Protection, the Monetary Authority of Singapore and the Hong Kong Monetary Authority, reported Financial Times.
The group plans to go beyond a global sandbox. The regulators will also share policy ideas to ensure they are up-to-date in areas such as artificial intelligence, Big Data and blockchain.
“Financial services regulators must re-consider existing ways of working and collaborating, in order to balance potential benefits of innovation (for consumers and the financial sector as a whole) with traditional policy objectives, namely financial stability, integrity, financial inclusion, competition and consumer wellbeing and protection,” stated the FCA’s consultation paper, which was published on Tuesday.
According to the latest Innovation Readiness Playbook, sandbox tests are a favorite tool of top innovators. That’s because these tests are designed to provide a closed environment in which FIs can experiment with new features and products before commercial release, helping to ensure success and higher ROI. Sandbox testing is rare – just 22 percent of FIs report having used it. But those who do use the approach, including commercial banks, community banks and other FIs, report being more satisfied with their most recent product launches than those that do not.