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Jo Ann Barefoot explores how to create fair and inclusive consumer financial services through innovative ideas for industry and regulators

Global Sandbox


Global Sandbox

Mallory Kwiatkowski

Last week was UK FinTech Week in London, and the old City was bursting with ideas, conversation and people gathered from all over the world. I spoke at the Innovate Finance Global Summit, which explored the world’s newest technology in the oldest venue I’ve encountered -- the 800-year old Guildhall, where we met in crypts and in spaces with names like Livery Hall, Grocer’s Hall, the Old Library and the Chief Commoner’s Parlour. I also keynoted the FSD Africa gathering of African regulators at the nearby, equally venerable, but grander Mansion House, a conference co-sponsored by Cambridge University. I was able to join in events ranging from the World Economic Forum’s roundtable on artificial intelligence to the UK Ministry of Trade fintech design sprint. I talked, one-on-one, with leaders in fintech, regtech, finance and regulation from literally dozens of countries.

An awakening is sweeping through these sectors. It’s a realization that we’ve begun to digitize both finance and financial regulation, that this will transform them, and that if we manage it right, both realms can become far better than ever before.

Of all the big thinking aired last week, the most exciting might be the idea of creating a Global Sandbox for financial regulators.

The word “sandbox” sounds playful and therefore unserious to many serious financial regulators. As brand-building, though, it’s been a huge success. The UK Financial Conduct Authority launched its initial regulatory sandbox in 2016 under its Project Innovate and Innovation Hub.  Today, dozens of other countries have emulated it (some using different terminology, such as “RegLab”).

The sandbox concept has caught on because it creates a tool that is otherwise missing from the regulators’ toolbox, namely a controlled, contained, safe way to learn fast, through experimentation. As I have written elsewhere, regulators need this new device, because their traditional methods of learning are too slow for, and too remote from, the bleeding edge of the technologies reshaping finance, from blockchains and cryptocurrencies to digital customer identification and machine learning in underwriting. If regulators choke on such changes, the public will never benefit from their upside potential. If they stay hands off, some of these developments will cause harm -- and will be hard to stop once they are rooted in and spreading throughout the market. Sandboxes can’t solve all of this, but they are crucial to evaluating potential benefits and risks early, and helping industry and regulators develop shared thinking on how innovation should evolve.

Last month, the FCA continued to plough new ground by publishing a Global Sandbox Proposition. Its strategy head Christopher Woolard (see my podcast with him), says the UK’s sandbox work with over 60 firms has enabled important experimentation, strengthened consumer safeguards, shortened innovators’ speed to market, and increased access to financing. Noting that many financial services are global, the agency also says UK firms are now testing concepts in multiple countries’ respective sandboxes, and the FCA is learning from the sandbox efforts of other nations. It is inviting input on whether and how to work toward a global sandbox, perhaps overseen by a new College of Regulators.

During Fintech Week, FCA leaders convened international regulators, innovators, and others to think through whether the idea has merit and if so, how to pursue it. A global sandbox could test both fintech that can benefit consumers, and also regtech for use in industry compliance and for regulators themselves. Hands-on experimentation, undertaken side-by-side with innovators and with other regulatory bodies, could open an invaluable, rapid route to optimizing financial regulation for the digital age.  

A note on Fintech Week:

If someone wanted to launch a U.S. version of fintech week, they would face a geography challenge. As Lawrence Wintermeyer has noted, the UK has an edge in fintech and regtech because it combines “tech” like the U.S. west coast, “fin” like New York City, and “reg” like Washington, DC, all within a fifteen minute taxi ride. That means, crucially, that the people know each other. In the U.S., we should actively bridge the gaps between these three communities.

CFSI panel on Fintech and the Federal Government, U.S. Senate Dirksen Building

I helped this month in an effort to do just that by moderating a Capitol Hill panel for the Center for Financial Services Innovation. We brought in five fintech firms -- AffirmCircleLendUpPetal, and Stripe -- and talked about regulatory challenges faced by innovators. We had a great audience of congressional staff, regulators and policy leaders, and hope to convene more such discussions.

Recent Events

Featured podcasts:

I enjoyed recording this podcast with London’s 11fs

My new Barefoot Innovation podcasts

My latest article:

            BankThink: Regtech could help stop human trafficking - American Banker

Upcoming Events:

  • FCA TechSprint, May 22-25, London, UK

This month’s must-reads:

Be sure to follow me on twitter and facebook.  As always, check the website for more updates. Most importantly, keep innovating!

Jo Ann