Global Sandbox: the next stage for evolution of the fintech ecosystem

Hogan Lovells hosted a panel discussion on 10 April 2018 with Innovate Finance on the FCA's regulatory global sandbox. Rachel Kent, partner and head of Financial Services Regulation at Hogan Lovells, moderated a panel featuring Sameer Gulati, head of Policy and Research at Innovate Finance, Jamie Campbell, Awareness at Bud, and Anna Wallace, head of Project Innovate at the FCA.

The lunchtime event was held following the FCA's call for feedback on a global sandbox, which it released via a webpage published on 14 February 2018. The regulator hopes to access sandbox facilities in more jurisdictions outside the UK alongside the FCA's current regulatory sandbox, though how this will be done is still being worked out. The lunch sought to further the discussion.

Rachel Kent first asked panellists to reflect on their experience of the existing regulatory sandbox. The consensus was positive, with praise for the innovative scheme's ability to help young companies test and develop their products. Jamie Campbell, whose company Bud has been in the sandbox as part of cohorts 1 and 3, said the "safe space" it provided was critical to Bud's early development, as well as allowing the company to build regulatory compliance into the product itself. He particularly praised the progress the sandbox had made since the early days. Sameer Gulati emphasised the benefits of being able to test products without risk to consumers while Anna Wallace noted that 90% of the companies that had taken part in the sandbox, which is now in its third iteration, had gone on to take their products to market.  

Looking forward, Anna Wallace highlighted the FCA's increasingly international focus. Indeed, the FCA has been "overwhelmed" by interest in its sandbox from abroad and this has led to the question of whether a "distributed network of regulators" could be created to allow innovators to access other markets, moving international regulation beyond simple cooperation agreements. This is the foundation for a global sandbox.  

The question of whether the FCA might lead such a sandbox was raised. Anna Wallace noted that of the circa 1600 fintechs present in London, 1100 have come through the FCA's Project Innovate, making it at the very least well-placed to initiate discussions on the subject. In particular, Jamie Campbell said it made sense for the regulator to provide guidance for countries with less developed regulatory regimes, while Rachel Kent noted that other regulators recognised the FCA's ability to deal with the complex regulatory questions raised by innovative companies. The general feeling from the panel, though, was that a sandbox would require global coordination rather than being simply UK-led.

A global sandbox does raise knotty questions around regulatory harmonisation, as well as requiring thinking on the best model for it. Nevertheless, these concerns were not enough to dissuade the panel's enthusiasm. Opportunities abound and, similar to open banking's effect, an international, innovative regulatory platform might give rise to a new style of global regtech (robo-regulation and robo-advice are also being explored). Whatever shape a global sandbox ends up taking, it is clear, as Anna Wallace said, that there is motivation, inspiration, and willingness for it.

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