DMPQ: What is regulatory sandbox and How it is beneficial?

A regulatory sandbox (RS) usually refers to live testing of new products or services in a controlled/test regulatory environment for which regulators may (or may not) permit certain regulatory relaxations for the limited purpose of the testing. The RS allows the regulator, the innovators, the financial service providers (as potential deployers of the technology) and the customers (as final users) to conduct field tests to collect evidence on the benefits and risks of new financial innovations, while carefully monitoring and containing their risks. It can provide a structured avenue for the regulator to engage with the ecosystem and to develop innovation-enabling or innovation-responsive regulations that facilitate delivery of relevant, low-cost financial products. The RS is potentially an important tool which enables more dynamic, evidence-based regulatory environments which learn from, and evolve with, emerging technologies.

Its Benefits:

  • users of an RS can test the product’s viability without the need for a larger and more expensive roll-out.
  • FinTechs provide solutions that can further financial inclusion in a significant way.
  • by providing a structured and institutionalized environment for evidence-based regulatory decision-making, the dependence of the regulator onindustry/stakeholder consultations only is correspondingly reduced.
  • the RS could lead to better outcomes for consumers through an increased range of products and services, reduced costs and improved access to financial services.

 

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