Financial regulators around the world are looking for more flexible ways to engage with fintech companies while being mindful of the inherent risks. Although the importance of interacting with this sector is widely accepted, the most appropriate instrument to do so is still being determined.
A tool that has become increasingly popular and synonymous with innovation is the ‘Regulatory Sandbox’. While nuances exist, they are fundamentally a regulator-controlled environment that allows participants to test their products, services and business models. However, Sandboxes are only one of several tools that regulators can use and have both benefits and challenges associated with them.