Regulating FinTech Through Sandboxes

Abstract

Fintech emergence post-Global Financial Crisis puts a threat to the banking industry. One of the strategies for the banks to stay afloat and relevant in the current digital era is through regulatory sandbox. A regulatory sandbox is one of the tools opted by financial regulators in certain jurisdictions to regulate the rapid growth of fintech products within their financial sphere. The pioneer of which was the UK s market and conduct regulator, the Financial Conduct Authority (FCA). Bank Negara Malaysia (BNM) was also one of the first jurisdictions that followed suit. One of the basic structures in a sandbox is the eligibility criteria that the regulators draw for the financial service provider to participate in the sandbox. This chapter shall address the entry requirements in both jurisdictions as the structure of the regulatory sandboxes differs from one jurisdiction to another. This topic is crucial to the banks as they need to understand further how regulatory sandbox may help them offer innovative financial products to level the competition with the fintech players in the market.