Regulatory Sandbox: Goals and benefits

This post is the fourth a series dedicated to the Regulatory Sandbox. Its importance lies in the recent approval of the Draft Bill for Digital Transformation of the Financial System by the Spanish Council of Ministers on 18 February 2020. Our knowledge of Innovative business models, and its regulation is key to deliver an end-to-end service to our clients. In this post we will talk about Regulatory Sandbox :What are the benefits for regulators, supervisors and customers? 

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Main Goals

We can say that the creation and implementation of the regulatory Sandboxes meet the four main objectives that any country that wants to lead financial innovation must carry out:

  • Monitoring financial sustainability and minimising risk, with supervisors close to the innovation to see how it can be developed within existing frameworks or, if necessary, tailor-made.
  • The mitigation and adaptation of the regulatory burden that innovative projects have to bear, and which in turn may compromise their viability, making it easier for supervisors and regulators to understand, what these new activities consist of.
  • Creating an ideal space to encourage the development of open innovation and collaboration between the traditional sector and FinTech and InsurTech.
  • Attracting international entrepreneurship and investment.

Advantages

Therefore, the implementation of a Sandbox in Spain would imply multiple advantages for the development of the FinTech and InsurTech sector, highlighting, among them, those that we advance here.

Sector growth

There is no doubt that having a regulation adapted and proportional to the needs of firms that are in their primary stages of development or maturity, can mean both a revulsive to their creation, and a reduction in costs and time in the launching of products and services of these entities to the market.

Security and legal certainty

 The implementation of Sandbox may allow some of the FinTech, RegTech and InsurTech companies to enjoy the testing period so that they can gradually and progressively achieve the requirements for obtaining an ordinary license. In this way they would not be required to meet all these requirements at the outset, making many of the disruptive technology business models available to the market and helping them to flourish in a safe and legal manner. 

Competitiveness at an international level

We are seeing how companies that have great talent and potential at the level of innovation and development of business models, see the need to launch their products outside our country. With the implementation of the Sandbox, a concentration of talent in Spain would be achieved, as well as a greater international attraction at a legal, economic and investment level. Furthermore, it will not only help startups in particular, but also companies already established in the market, improving their approach at the organizational level by expanding their capabilities and innovation strategies, responding to specific cases by launching new products and similar services more effectively and efficiently. 

Increase the supply and quality of FinTech and InsurTech services

Creating effective competition in the market. This will be reflected in the ultimate benefit to the final consumer, as more competition will lower prices and improve service, resulting in social benefit and therefore public interest. 

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