Guide to Singapore's FinTech Sandboxes for Financial Service Providers

Guide to Singapore’s FinTech Sandboxes for Financial Service Providers

SINGAPORE – Financial technology (FinTech) can be the key in pushing a country’s banking industry to the forefront of innovation. The government recognizes that and is readying Singapore in its metamorphosis into a smart financial centre. Considering Singapore’s incessant pursuit of new heights in the financial services industry, relevant regulatory authorities frequently updates its policies to encourage development in this sector.

The Monetary Authority of Singapore’s (MAS) FinTech Regulatory Sandbox was started in 2016 to foster ingenious and disruptive finance-related business solutions and models that can change the city-state’s financial landscape. Under this system, companies can experiment with their products within clear boundaries and a safely regulated space. The sandbox fosters an environment which serves as a test-bed for these services within a limited timeframe. It is through experimentation in the sandbox that financial institutions can grasp how the market and consumers might respond to the product being offered.

This article illuminates the regulatory sandboxes that are currently available and provides information to FinTech business owners who are seeking such platforms to validate their products. 

Driving Innovation through Regulatory Sandboxes

The MAS FinTech Regulatory Sandbox allows companies to experiment with new financial products and solutions [MAS]. This includes payment processors, niche solutions providers, and B2C transaction enablers. Products oriented towards digital financial inclusion by facilitating financial services for the underserved and marginalized will be granted more market benefits as well. These include reduced time-to-market cycle, a standardised and publicized framework, and improvements to product competitiveness.

MAS will support these innovative solutions by relaxing specific legal requirements for the entirety of the sandbox experimentation. Such relaxed regulations, however, shall not be extended to businesses after the Sandbox is ended.Aspiring entrepreneurs are often encouraged by startup-turned-hypergrowth companies that overthrow the notions of the very industry the are in. Companies in FinTech have revolutionized payment systems and wealth management platforms. Since regulatory sandboxes play a part in helping companies test and legitimise what they have built, their presence is imperative to the progress of the firm and the finance industry itself.

Sandbox Express Risk Assessment

Building on the well-received FinTech Regulatory Sandbox, the Sandbox Express was rolled out this August by the MAS. This enhanced programme allows enterprises to test their Fintech products in an accelerated yet regulated way. In this novel scheme, Sandbox applicants will receive a response from MAS regarding their application within 21 working days.

Sandbox Express, for now, is only extending its application invitations to businesses focusing on insurance brokerage, establishment or operation of an organized market and business remittance. Enterprises that have well-controlled and reasonably-contained risks are also preferred applicants of Sandbox Express.

Operational Costs

Although most sandbox entities can be established free-of-charge, operational costs are still borne by the company. The sandbox framework simply decreases product development costs by hastening the process and granting an actual market to test the product in. This allows firms to tweak and improve the product before an official launch. 

Product Competition

Typically, competitors offering similar services can directly affect the sandbox experiment’s success. The limited timeframe of regulatory sandboxes makes it difficult to cope and experiment with the dynamism of market changes. Such situations may lead competing companies to focus on marketing instead of product quality

Innovator Bias

There may be a preferential regime for innovators who show immediate success in financial inclusion. This may cause many startup FinTech company owners to align their resources to achieve short-term growth. As a result, product development will focus on a niche segment and potentially ignore the larger market in the long-term.

 

Corporate Service Solutions for FinTech Companies

Regulatory sandboxes can drive innovation in FinTech and propel Singapore as it steps up in becoming a smart financial hub. It provides the opportunity for entrepreneurs to service untapped markets if they pass the MAS criteria to venture into the industry.

At DesFran, we understand Singapore’s financial sector and can help you establish your FinTech company’s startup. We offer corporate service solutions which can streamline your business operations during the experimentation period, and assist you in fulfilling statutory requirements to qualify for the program and connect you to our network of trusted businesses who can help in optimising your business processes.

 

About the author

Joyce Sun is Strategic Communications and Research Intern at DesFran. Joyce enjoys learning as she writes financial news blurbs and editorials involving financial regulatory developments due to her keen interests in equities and finance-related topics. She is a final year honours student at the National University of Singapore hoping to pursue a career in the finance industry, and to continue developing her knowledge in investments.

 

References

Guide to the regulatory sandbox, MAS.gov.sg

Regulatory Sandboxes and Financial Inclusion, CGAP.org   

How will Singapore’s new express sandbox help FinTech firms, TechWireAsia.com

 

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