This post is the second of 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 startups, financial companies or investors?.
Regulatory Sandbox : Entrepreneurs, FinTech, InsurTech, RegTech
Sandbox seeks to help firms understand how regulation applies to them and provide greater regulatory certainty to encourage innovations which have positive benefits to consumers.
Talent retainment and attraction
Today many entrepreneurs choose to launch their startups based on the ease of implementation of their business model, evaluating licenses and regulatory frameworks in the first place. A Regulatory Sandbox can prevent the exit of entrepreneurial talent from a country. According to the AEFI, Spanish Sandbox could create more than 4,000 jobs within 2 years.
The implementation of Sandbox within the European Union will undoubtedly attract FinTech, InsurTech and RegTech projects from other European member states that do not have such attractive regulatory frameworks. Whether they are regulated or not.
Complex projects acceleration
One of the first obstacles faced by FinTech entities is precisely the complex bureaucratic system, especially in the first stages of life of these new firms. A controlled testing environment would help lighten the bureaucratic burden and also provide legal certainty to those entities that intend to operate in the market but are unaware of traditional financial regulation.
Communication with Authorities
Easy dialogue with different supervisors that exist as well as with other bodies involved.
Traditional financial and insurance companies
Launching innovative projects
An unclear legal framework is one of the major slowdowns of the most innovative projects carried out by financial and insurance companies. For this reason, regulatory Sandbox is an ideal instrument for these projects to be managed with supervisors in a safe environment. Avoiding possible reputational effects or risks for clients.
A real boost to open innovation and open banking
Regulatory Sandbox is a great opportunity for large corporations so they can collaborate with the most innovative and disruptive startups seeking for co-creation of high-value projects.
According to a study by Finnovating, firms that have been supported by UK Authorities in Sandbox, had received an average investment of more than 6 million pounds. This represents a real magnet for funds interested in FinTech investment.
This is one of the main reasons why UK is a leader in the sector, with 50% of total investment across Europe, according to Finnovating’s European FinTech investment reports.
Innovative business models with the green light of the supervisory authorities is a great guarantee of success. For this reason, increasingly, specific funds are being created to invest in companies that are part of Regulatory Sandbox.