Why Playing In The Sandbox Is Good For FIs

Sandboxing, though a beloved buzzword in the developer community, didn’t get its start in the context of programming or computers at all. Sandboxing was originally a military term — and it involved a literal sandbox.

That sandbox had a strategic function: When generals wanted to lay out troop formations, supply lines and other logistical complexities in a way that was easily visible, they literally broke out a sandbox in which to do it. Hence, the term “sandboxing.”

Damo Sampathkumar, general manager at Renovite, told Karen Webster in this week’s edition of “Beyond The Buzzwords” that apt terms like sandboxing tend to make jumps from industry to industry as they become relevant in new contexts. In the world of development, where planning and strategizing are a big part of the game, a concept like sandboxing was a natural fit — especially these days, Sampathkumar told Webster, as the term has become part of a constellation of buzzwords that have become popular regarding the FinTech development process.

“There are a few things that are happening out there right now that are getting a lot of attention — you hear sandboxing alongside ideas like prototyping, proof of concept, minimum viable product,” Sampathkumar said. “These are all ways of signaling that a firm is trying something new out. They are looking for a way to innovate and to find a new way of doing things. In payments, they are usually trying to build something more convenient without diminishing the consumer experience or the security.”

The sandbox, he noted, is a special step, offering firms that make use of it to get ahead of the both the function and regulatory issues, which even the most innovative ideas can face out in the open market. Done right, he added, that can save a firm a lot of heart, hassle and money. The trick is knowing the when and how of doing it right.

The Properly Constructed Sandbox

Sandboxing comes into play, according to Sampathkumar, when an aspiring innovator has the prototype design they want and the time has come to test it.

“This is often a fully functioning prototype, but it is not something that is necessarily ready to be thrown out to customers or go into mass production. This is where sandboxing comes in,” he said.

Sandboxes, in a development, are controlled environments where the prototype can be set loose and tested internally. Like the military version of old, they are the stage where one gets to see what the idea in action will look like. Sometimes, Sampathkumar noted, these are fully internal, closed-loop environments only open to insiders. Other times, particularly when firms are working collaboratively, they can be closed loops with access for a select few, tasked with testing and perfecting it.

“At base, a sandbox is a development environment where there can be testing and learning in a controlled setting before technology is just released into the wild,” he said.

In the past, Sampathkumar noted, the ability to extensively make use of sandboxing has been limited to larger players in financial services because creating those closed-loop virtual settings required an awful lot of serve space. But the with the advances in cloud computing over the last two decades, the picture is now very different.

He explained, “Sandboxing today isn’t really that difficult because of the server space available in the cloud, which means banks and providers of all sizes really can build out their own sandboxes, demonstrate the functionality of that product for customers, learn how it works and doesn’t, and really understand what it will take for a fully operational launch.”

Sandboxing as a tactic is more accessible than it has ever been, Sampathkumar told Webster, which means the way firms are most likely to “get it wrong” is by not doing it at all.

Why It Doesn’t Pay to Skip the Sandbox

In a prior but recent era, skipping the sandbox phase was a reasonable response due to the upfront costs associated with it. Those costs are dropping away in the cloud computing era, which means firms big and small now need to consider the costs to skipping the sandbox, Sampathkumar said.

And those costs are real.

“I think you can see this across the globe, especially where I am standing right now in China and India, particularly around mobile wallets,” he said. “Those are coming from all sources, from banks, from providers, or from big global groups like PayPal and Amazon. And what you see a lot is a lot of competition to be first to market with products, not a lot of focus on collaboration, and a lot of sandboxing gets pushed to the back burner.”

The problem with moving fast? Things break. In heavily regulated compliance environments, broken stuff isn’t just a function problem — it can render a product wholly unusable in entire markets.

Among the things sandboxing lets financial services innovators game out and solve are regulatory structure and compliance rules, Sampathkumar noted. Instead of allowing regulatory compliance to become a last step, often a panic-inflected series of boxes that must be checked off before a product can launch as planned, sandboxing instead allows those rules and features to be considered and baked in to prototype design from the earlier phases.

“The power of solutions, that are properly sandboxed, is that it takes a given [set of] rules and regulations … no matter what a financial services product has to follow. It should be easy today, with the technology available to incorporate these things from day one and actually build tech that does more in less time,” Sampathkumar said.

Beyond the Buzzword

Ultimately, he noted, innovators aren’t well served if the first real test their innovations gets is live and in the hands of a consumer. Ideally, in the 21st century, providers of all kinds should be able to tap into the commoditized cloud and build sandboxes that will really let them see their products work — or not.

“It is a lot better to launch something in a sandbox and realize it is not something you actually want to go ahead with. The costs associated with that are fairly minimal, especially when compared to launching a failed product,” he said.

That’s because, he noted, beyond the buzzword, the basic concept behind sandboxing hasn’t really changed since the military started using the term. Prepare and visualize before you commit to a plan going forward because, once one is on the market or battlefield, it will be a lot harder to adjust.

He said, “Ultimately, more forethought and testing is just how all of today’s software should be built. I think the time is just right for banks and providers to fully embrace this.”