European financial regulators have published a report that sets out best practices for regulatory sandboxes and fintech innovation hubs, which have proliferated in recent years as policy-makers aim to support fintech innovation.
The region’s banking, securities, insurance and pension regulators, which are collectively known as the European Supervisory Authorities (ESAs), published a joint report on regulators’ efforts to facilitate innovation with regulatory sandboxes and innovation hubs. Sandboxes enable firms to experiment with new products and services, while innovation hubs aim to help firms navigate regulatory frameworks that were designed with traditional financial firms in mind. So far, 25 countries have established innovation hubs and five have regulatory sandboxes.
The report provides a comparative analysis of the region’s initiatives over the past few years, and it sets out best practices for the design and operation of both regulatory sandboxes and fintech hubs.
The regulators say their best practices are intended to: promote consistency in how these initiatives work; promote transparency in policy outcomes; and facilitate cooperation among regulators, and consumer and data protection authorities.
The regulators also set out options to promote coordination and cooperation between fintech hubs and regulatory sandboxes that they say would support fintech scaling up through the region.