London : The European Union’s banking watchdog said guidelines being drawn up for nurturing cross-border fintech companies will include recommendations for the core design of a “sandbox” and innovation hub. The sandbox, or controlled environment some countries offer fintech firms for testing new applications on real customers, was first launched by Britain and is regarded by the sector as having helped London become a major fintech hub.
Just two other EU countries, Denmark and the Netherlands, have sandboxes and Britain’s departure from the EU next year has put pressure on Brussels to step up efforts to encourage fintech firms to set up shop in the European Union. Elisabeth Noble, a policy expert at the European Banking Authority (EBA), said the watchdog will publish its guidelines in December. “Our report in December will include an analysis comparing the existing sandboxes and innovation hubs, and recommendations for the core design of a sandbox and innovation hub,” Noble told Reuters in a briefing.
Innovation hubs provide a forum for regulators and fintech firms to discuss ideas, while sandboxes allow them to test new products, such as making payments using a smartphone, on real customers - all without having to go through a costly and lengthy full authorization process first. “We hope this report will lead to a common and more coordinated approach, to help with cross-border scaling up of fintech firms, which needs sandboxes and innovation hubs working together,” Noble said.
The introduction at the start of this year of new EU cross-border electronic payments rules which allow startups to access a customer’s banking data to offer new services, is driving demand for more sandboxes. Felix Hufeld, head of German regulator Bafin has said he does not want to give startups “little buckets and spades” to avoid the full panoply of financial rules, but Noble said that would not be the case.