The Global Financial Innovation Network (GFIN), a network of 29 worldwide regulatory bodies chaired by the UK’s Financial Conduct Authority (FCA), has opened applications for its cross-border testing pilot, per an FCA statement.
Accepted companies will be able to use the cross-border innovation sandbox to test their products, services, and business models. To participate in the six-month-long pilot phase, expected to start in the second quarter of 2019, firms must meet the regulators’ application requirements in all the jurisdictions in which they wish to test.
This news comes almost one year after the FCA, in collaboration with 11 other regulators, proposed the creation of a global regulatory sandbox.
The cross-border sandbox offers potential benefits to companies and regulators alike:
- Fintechs can test their solutions in a safe and broad-based environment.Participating firms will be able to access a pool of shared knowledge, consider new ideas, and trial their solutions across borders. The sandbox also provides a safe testing environment where fintechs don’t need to assume the normal risks to their reputation and viability associated with noncompliance. This is particularly important in a cross-border operation context as regulatory compliance requirements become increasingly complex.
- It creates a framework for collaboration between regulators, while allowing them to ensure innovative ideas and new technologies are focused on compliance.One of the GFIN’s primary functions will be to act as a regulatory network for sharing the “experience of innovation in respective markets, including emerging technologies and business models,” enabling regulators to better understand innovative ideas and new technologies. The sandbox will also allow regulators to better address global compliance pain points by providing a platform for shared regtech work and collaboration, while overseeing that compliance is embedded within the participants’ business models.
Following an enthusiastic response to the FCA’s consultation paper for the global sandbox, we expect its launch to attract significant interest from FIs and fintechs. The FCA received positive feedback through 99 responses from 26 jurisdictions to its GFIN consultation paper, proving the regulator’s ability to find widespread support for its mission to encourage global innovation.
Notably, the FCA has a great track record with its domestic sandbox, with 89 companies using its test bed under four different cohorts, and it recently received applications for its fifth cohort. As a result, we expect the GFIN to attract a slew of applications from fintechs. And in the future, we expect to see a large number of fintechs using its test bed successfully going to market with their solutions.
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