More sandboxes needed for jobs and growth
Fintech and InsurTech are the talk of the town. What is it? And what do sandboxes have to do with this. Can the sandbox concept also serve other aims? Jobs and growth, for example? Or more diversity in the financial landscape? China is experimenting with mutuals because it wants to grow. And Europe?
There is much talk today about FinTech and InsurTech in the industry, the regulatory and supervisory community and among lobbyists. They can be best described as a variety of emerging technologies and innovative business models with the potential to transform the financial as well as the insurance business. To say it simple: FinTech and InsurTech is about technology driven innovation which may overturn the current way of doing business.
The European and national regulatory framework for financial services is for newcomers complex, extensive and difficult. So how can we marry technological innovation – where speed is crucial – and regulation, and still protect consumers while giving them the benefit of these new possibilities FinTech and InsurTech open?
This is where the sandbox idea comes into play. In IT and scientific environments, the sandbox idea is used to test the proof of concept. By analogy, several jurisdictions in the EU and around the globe are creating (financial) regulatory sandboxes which allow innovations to emerge in a controlled environment: these innovations can be innovative products, services, business models and distribution mechanisms. In a sandbox, which functions as a safe heaven, both authorized and aspiring players do not have to bear immediately all the normal legal consequences of those tests.
The Commission’s FinTech taskforce, created last year to assist the Commission in its policymaking is also skimming the horizon and exploring if the sandbox idea is an answer to the FinTech challenge. EIOPA’s focus is on InsurTech, and its InsurTech roundtables will also touch upon this issue. So, much thinking is going on at EU level, while (some) Member States steam ahead by setting up their own version of a regulatory sandbox.
The advantages of the sandbox concept are clear and include increased mutual understanding, guidance, controlled environment, speed of launch, avoidance of illegal launches, …
Given its attraction, can we export the FinTech/InsurTech sandbox idea to other areas of innovation? Why limit it to technological innovation? Can we stimulate diversity, jobs and growth by extending the concept? Is there space for more sandboxes?
China recently set up what one can coin to be a mutual sandbox. Early 2015, the CIRC issued a trial regulatory scheme for mutual insurers. Its intention was to have newcomers supervised very carefully, to be small in size but to be very professional. Before giving final approval, CIRC plans to conduct mutual insurance trials for one year. The first pilot has been concluded and a new mutual credit insurer was licensed to meet the funding need of SMEs, which have difficulty in securing credit.
Can we learn from China? Can mutual sandboxes be an option for stimulating diversity, but more importantly, jobs and growth? Maybe Europe needs more regulatory sandboxes than only for FinTech/InsurTech. The concept is promising and we think merits further careful examination.
For more information about sandboxes, regulatory frameworks, and new ideas, contact email@example.com