MAS firming up regulatory 'sandbox' for fintech ideas

It is seeking feedback on creating guidelines for fintech innovations

MAS has asked for public feedback on creating new guidelines for financial technology innovations. PHOTO: AFP

A move to make it easier for innovators to experiment with new financial products or services regulated by the Monetary Authority of Singapore (MAS) has made progress.

MAS has asked for public feedback on creating new guidelines for financial technology (fintech) innovations that are deemed "technologically innovative" and beneficial to consumers or the industry.

It wants clearly defined test scenarios and outcomes that can be tested out in a "sandbox" or relaxed regulatory environment.

This way, innovators will not be deterred by regulatory compliance costs, which can be stifling.

"This will give innovations a better chance to take root," said MAS deputy managing director Jacqueline Loh in a statement yesterday.

Placing innovation in a "sandbox" where new products are offered to a small test group of customers or trialled over a six-month period limits the consequences of failure, so the overall safety and soundness of the financial system is maintained, the authority said.

MAS officials have spoken before about the merits of a "sandbox" approach to regulating fintech, and some entrepreneurs and banks have engaged the regulator to discuss how their ideas can be launched in a sandbox.

Mr Richard Koh, chief executive of M-Daq, a capital markets fintech start-up, cheered the new move for levelling the playing field between start-ups and the incumbents. "Regulations and licensing can often be an insurmountable minefield to clear before any business can be conducted," he said.

Ms Agnes Siaw, executive director of crowdfunding platform FundedHere, said: "The sandbox approach is an effective way to allow nascent crowdfunding sites to provide much-needed funding to smaller firms."

Banks such as Standard Chartered, DBS, UOB, OCBC, Citi and UBS also welcomed the initiative.

Mr Jeremy Tan, treasurer of the Singapore Infocomm Technology Federation, said: "This is a great step forward by MAS... (although) we need to see how the details pan out. One of the key evaluation criteria is whether the fintech solution is technologically innovative or applied in an innovative way. The test is very subjective and depends a lot on the assessors."

The usefulness of the sandbox also depends on its boundary conditions. Mr Tan said: "A sandbox limit of 50 customers (for example) is too low - you cannot effectively test technology with just 50 users."

The public consultation closes after July 8. A copy of the consultation paper is available on the MAS website. It did not state the timeline for implementation.

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A version of this article appeared in the print edition of The Straits Times on June 07, 2016, with the headline MAS firming up regulatory 'sandbox' for fintech ideas. Subscribe