Successful FinTechs passing through any sandbox
are those that scale quickly, are able to provide the market with financial
inclusion and solve problems.
Featured image via Singapore FinTech Festival’s Twitter page.
At Day 2 of the Singapore FinTech Festival Conference, 3 speakers from the
respective financial supervisory authorities of Singapore, Japan and Sweden had
a discussion on the impact of digital technologies on their countries’
financial industries. The speakers were:
Mr. Ong Chong Tee, Deputy Managing Director, Financial
Supervision, Monetary Authority of Singapore (MAS),
Mr. Motonobu Matsuo, Deputy Director General, Credit and Insurance Systems, Financial
Services Authority of Japan (JFSA); and
Mr. Erik Thedéen, Director General, Finansinspektionen
(Sweden’s Financial Supervisory Authority).
The session was moderated by Mr. Conan French, FinTech Advisor, IIF.
Mr. Ong began the session on regulatory insights with an overview of MAS’s view
on the impact of digital technology developments for stakeholders. This
includes wide-ranging benefits such as enhanced decision making, more
meaningful insights and better risk management, and also the equal challenges
such as legacy IT and system constraints, cybersecurity, data security and
governance, change management and more.
With respect to digital developments in Japan’s financial industry, Mr. Matsuo highlighted
that the country has just introduced an open API system for banks in Japan.
Broadly, the regulators’ approach is to set general standards and be open to
allowing new companies to enter the financial system, while keeping in mind the
importance of consumer protection and data safety.
Mr. Thedéen shared that Sweden has undergone dramatic changes in how the
economy operates in recent years, with people predicting that the country will
be cash-free in 5 to 7 years. This movement towards digitisation is not the
result of any regulatory initiatives, but the cause of a cloister effect with
people influencing each other to change their practices. Although Sweden is
relatively small in size, its nature of being early adaptors of innovation has
created a positive environment for FinTech innovation and is now amongst the
top three FinTech nations in Europe. However, Mr. Thedéen considers his
regulatory organisation to be lagging in terms of digitisation opportunities
and recognises a need to catch up with the changes in the industry.
Mr. Ong followed up the conversation with MAS’ initiatives
to catch up with the innovations in financial services, which include establishing
a data analytics group earlier this year. While MAS had been collecting and
analysing a large pool of data for decades, it acknowledged a need to use the
data better and is exploring technologies such as advanced algorithms, better
visualisation through supervisory dashboards, more effective data analytics and
the launch of a private cloud in future.
On the topic of future KYC (Know Your Customer) and AML
(Anti-Money Laundering) solutions, Mr. Thedéen noted that Swedish banks had
experienced severe fines as a result of AML/CFT failures and are improving
their processes in this area. He also noted that the country’s legal system and
regulatory system is currently not practical for regulating digital innovations
such as e-wallets and needs to be brought up to speed.
Mr. Matsuo cited the example
of Distributed Ledger Technology (DLT) used for KYC, whereby three mega banks
in Japan have collaborated to utilise DLT technologies to build a common KYC
In Singapore, Mr. Ong added that MAS
is building an e-KYC platform using a pilot group of banks as well to share
customers’ KYC data across these banks. He noted that this innovation also
bears risks such as moral hazard, regulatory forbearance of who is accountable
for authorising erroneous data, non-risk based reliance on the platform without
human judgement, and challenges with incorporating overseas customers to the
platform. Regulators and the industry must work together to solve these
problems in compliance and KYC, as well as other issues such as data privacy.
With regard to virtual currencies, Mr. Thedéen called for self-regulation of
Initial Coin Offerings (ICOs) and warned that any failures would be followed by
regulation. Mr. Matsuo and Mr. Ong highlighted that investors must remain
alert; in particular, MAS has published advisories and a new paper on its
stance regarding ICOs. Notwithstanding, Ong emphasised that the developments of
ICOs should be distinguished from that of DLT in general, which have greater
The session closed with a question on how regulators and the industry can build
capabilities to collaborate and adopt new technologies. Mr. Thedéen noted that
there is no one-size-fits-all approach and highlighted that while Finansinspektionen
does not actively promote a FinTech agenda, it is keen and willing to maintain
a close dialogue with the industry on its needs. Mr. Matsuo and Mr. Ong
presented a similar view on Japan and Singapore’s approaches – both pushed
strongly for FinTech innovation while balancing the need for consumer
protection at the same time.
Regulatory Sandbox – Colosseum or Just Child’s Play
Another interesting discussion panel on the same day was that on Regulatory
Sandboxes with speakers from Thailand, Australia, the Netherlands and Abu
Dhabi. The speakers were:
Mr. Buncha Manoonkunchai, Senior Director, Financial Technology Group, Bank of
Mr. Mark Adams, Senior Executive Leader of Strategic Intelligence, Australian
Securities and Investments Commission (ASIC),
Ms. Mirel ter Braak, Senior Policy Advisor Netherlands Authority for the Financial
Mr. Richard Teng, Chief Executive Officer, Financial Services Regulatory
Authority, Abu Dhabi Global Market (ADGM).
The session was moderated by Mr. Dan Morgan, Director Policy & Regulation,
Currently, there has been an explosion in the number of
regulatory sandboxes – 23 and counting. The regulatory sandbox has led to
market competitiveness, attracting investments, financial inclusion and market
Mr. Adams from Australia expressed his understanding of a regulatory sandbox as
that of an environment created within a regulatory framework where concepts
testing occurs. Different jurisdictions conduct their sandboxes in different
ways. In Australia, there is a class waiver from some licensing requirements to
allow a limited range of intermediaries and retail clients to test their
Ms. ter Braak said that in 2016, the Netherlands started an innovation hub at
the Dutch Central Bank for incumbents and innovators. Within six months, the
regulatory sandbox was established after observing the activity in the U.K. She
acknowledged that there are differences across the sandboxes in terms of
regulations and administrative laws. In Netherlands, they are working on a
principle-based approach for the sandbox and adapt accordingly based on the
progress of innovators.
representing Abu Dhabi, sees four key themes of emerging sandboxes – regulators
who have not created sandbox regulation or do not license FinTech, regulators
with sandbox regulation, some jurisdictions which have started a sandbox as a
result of neighbouring countries’ activities, and countries without a sandbox
but where FinTech is booming, such as China.
Manoonkunchai from Thailand added that sandboxes should enable the balance
between innovation and regulation, and promote risk management and consumer
protection. The sandbox in Thailand is a collaborative model where regulators
want to be more proactive, and learn and work together with innovators.
There was a
general agreement among the speakers that the regulatory sandbox is just part
of the picture. Mr. Adams mentioned that the sandbox gives informal assistance
to startups and flexibility in applying regulations through informing and
understanding the framework. The sandbox also promotes consumer protection,
market integrity, efficiencies which drives innovation.
Middle East, Abu Dhabi is ranked as the top FinTech hub. Mr. Teng highlighted
the factors that motivated Abu Dhabi’s regulatory sandbox – to help connect
people and to address differences. Abu Dhabi has a relatively young financial
sector and with an increasing population of 1.3 billion. With 86% of the
population who are unbanked, innovation is a goal. At the same time, the SME
community makes up 60% of the economy and yet, makes up only 4% of financial
services loan book. This all translates into demand for financial services and
presents a huge opportunity.
said that there is no one market which can work alone. Richard cited the
example of Singapore and the MAS, which has introduced bilateral protocols and
bridges to create bigger markets for FinTech players. Mr. Adams added that
there are talks between the U.K. and Australia on a FinTech bridge through
question on the standards in FinTech was raised. Mr. Adams identified two types
of standards – regulatory standards and technology or service standards. On the
regulatory end, the essential elements of a sandbox on the international level and
the provisions of consumer protection need to be identified.
standards should be set by the industry rather than by the regulators. Mr. Teng
mentioned that international standards will require time as every jurisdiction
has its own objectives and differences.
it may be too early to tell if the regulatory sandbox is successful, Mr. Teng
believes that successful FinTechs passing through any sandbox are those that
scale quickly, are able to provide the market with financial inclusion and
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