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From sandbox to sandcastle

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Another lively discussion followed my meeting with the FinTech communities in Asia. It was interesting as we had a chat about all aspects of what was happening in South-East Asia, and the overwhelming message that came back to me was that the regulatory sandboxes had become sandcastles.

What I mean by this is that the key centres of innovation in the region, where the regulators have created sandboxes for experimentation, there is an issue. It may be accessible to get into the sandbox but, to get out of it and into the mainstream, isn’t happening. It’s all good in theory but, in practice, when the bright young South-East Asian start-ups jump into the sandbox, the regulator does a pretty good job of building a wall around them, so they never get out. That’s why I use the metaphor from sandbox to sandcastle.

In fact, I was told that the head of the regulatory sandbox in one country had just been elevated to be the new Start-up Commissioner for that country when someone muttered more like the Shut-down Commissioner, and there was general laughing around the table. But it’s no laughing matter. If regulators stifle innovation, then you end up with stagnant markets where the big get bigger (and lazier and more complacent) and the small get smaller (and angrier and more frustrated).

I’m not saying that regulators should open to all and license everyone, but it is interesting that the enthusiasm that was palpable within the Financial Conduct Authority for their innovation project hasn’t been reflected quite so palpably elsewhere.

Again, it comes down to leadership and commitment, and my comments about leadership and commitment to banks converting to digital apply equally to regulators who want to encourage competition and digitalisation.

In addition, I’ve blogged before about what it takes to be a fintech hub and there are many ingredients: young talent pool, banks willing to partner, investment and capital availability, regulatory support and more; but the most important ingredient has to be government commitment.

Governments control the regulators who control the markets. If the government is not wholly committed to financial innovation and technology start-ups, then nothing moves. It just stagnates. And commitment is more than creating an innovation programme and a regularly sandbox. It’s about getting out there, getting your hands dirty and having a start-up system that supports and encourages, rather than constrains and discourages.

Now, I may be wrong in what I was hearing about the moans and groans of the start-up FinTech community, but either way it did make me realise that you have to go from sandbox to mainstream, not sandbox to sandcastle, if a regulatory programme is going to be truly successful.


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Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog,, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...

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