Do You Know About the FinTech Sandbox?

money sandbox


Good news, FinTech startup enthusiasts: It’s time to start playing in the sandbox again. Of course, the adult version is different from the sandbox of your childhood.  This new sandbox is a regulatory sandbox (or, as Charles Sousa called it during his Toronto Region Board of Trade speech, “regulatory super sandbox”) and is set to improve our FinTech market. Entrepreneurs get to play in a controlled environment (with proper supervision) and can use this setup to explore the potential of their startup idea. Governments across the globe are setting up sandbox initiatives in an attempt to grow their FinTech industries and move towards becoming a FinTech hub. This week we will be looking at these sandboxes.

Home to the business capital of Canada, it’s easy to see why Ontario is aiming to be the next FinTech hotspot. Government and business initiatives are being put into place to create a thriving FinTech market. By loosening regulations and introducing the Ontario FinTech Accelerator Office, Ontario is hoping to increase innovation and the presence of startups in both local and international markets. Participants test and fine-tune their startup concept, then get feedback from customers and use that to further improve their startup. Entrepreneurs exploring the brave new world of FinTech should keep an eye on this, as it is vital for those hoping to conquer the FinTech market.

Ontario’s regulatory sandbox is not an unchartered or unique initiative. Multiple countries have used this model in order to help bring forth innovation and foster a stronger business hub. First let’s look at the western hemisphere.

The UK Financial Conduit Authority was one of the first agencies to spearhead a regulatory sandbox and have been running cohorts for a few years. These sandboxes have proven to be highly successful, with attending entrepreneurs showing business growth and improvement. In fact, 90% of the participants in the first year proceeded to a market launch and 40% received investments because of the sandbox testing. It’s easy to see why this sandbox has been seen as a model for other countries.

Last year Switzerland set out to explore the effects of special licensing and reduced capital requirements for FinTech startups, hoping such an endeavor would make the country home to a FinTech hub. In their sandbox, FinTech startups were allowed to accept up to 1 million Swiss francs before regulation would be introduced. Thanks to this initiative, cryptocurrency startups are flocking to the country and its Crypto Valley.

As these hubs are close to North America, their breakthroughs would have a quick impact on our technology. For this reason, they should be watched with interest. However, FinTech sandboxes are not limited to this hemisphere.

Home to billions of people and three of the top five tech cities in the world, the eastern hemisphere’s contribution to technology cannot be overlooked. Many major cities in Asia have used sandboxes or are in the process of setting them up.

The Abu Dhabi Global Market, for example, runs a sandbox it calls the Regulatory Laboratory (RegLab). Currently on its second cohort (which includes the Canadian firm Remitr), the program had a promising first cycle and is set to expand when it moves into the new Fintech Innovation Centre in 2018.

Thailand (through the Bank of Thailand) set up a sandbox this year to improve the services offered in the country, while Singapore (through the Monetary Authority of Singapore) set up a sandbox to allow more experimentation and innovation in FinTech, purposely positioning itself as the place to grow the next breakthrough in the FinTech field. It will be interesting to see the new innovations and developments that come from these sandbox initiatives.

Japan is currently exploring the potential of the regulatory sandbox, and Prime Minister Shinzo Abe has stated that they are moving forward with a plan to minimize the regulation level imposed on FinTech startups. Considering how technologically savvy Japan has been in the past, this sandbox will likely bring forth amazing new concepts.

The whole world is looking at FinTech and everywhere wants to be the centre of the action. Although this has the potential to create an environment of hostility, it is actually bringing forth amazing collaborative think tanks. FinTech sandboxes are a fantastic way for entrepreneurs to explore how to improve their FinTech concept. Keep an eye on these sandboxes, as they are where the next big technological breakthrough will be cultivated.

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