Building FinTech Ecosystems: Regulatory Sandboxes, Innovation Hubs and Beyond

44 Pages Posted: 26 Sep 2019 Last revised: 8 May 2020

See all articles by Ross P. Buckley

Ross P. Buckley

University of New South Wales (UNSW) - Faculty of Law

Douglas W. Arner

The University of Hong Kong - Faculty of Law; University of Hong Kong

Robin Veidt

University of Luxembourg - Faculty of Law, Economics and Finance

Dirk A. Zetzsche

Universite du Luxembourg - Faculty of Law, Economics and Finance; Heinrich Heine University Dusseldorf - Center for Business & Corporate Law (CBC); European Banking Institute

Date Written: November 1, 2019

Abstract

Around the world, regulators and policymakers are working to support the development of financial technology (FinTech) ecosystems. As one example, over 50 jurisdictions have now established or announced “financial regulatory sandboxes”. Others have announced or established “innovation hubs”, sometimes incorporating a regulatory sandbox as one element. This article argues that innovation hubs provide all the benefits that the policy discussion associates with regulatory sandboxes, while avoiding most downsides of regulatory sandboxes, and that many benefits typically attributed to sandboxes are the result of inconsistent terminology, and actually accrue from the work of innovation hubs. The paper presents, as the first contribution of its kind, data on regulatory sandboxes and innovation hubs and argues that the data so far available on sandboxes does not justify the statement that regulatory sandboxes are the most effective approach to building FinTech ecosystems. Given that regulatory sandboxes require significant financial contributions, sometimes new legislation, and intense regulatory risk management, and that sandboxes do not work as well on a stand-alone basis (i.e. without an innovation hub), while innovation hubs alone can provide more significant benefits in supporting the development of a FinTech ecosystem, regulators should focus their resources on developing effective innovation hubs, including in appropriate cases a sandbox as one possible element.

Keywords: FinTech, Innovation, Regulatory Sandbox, Restricted License, Special Charters, Piloting, Testing, RegTech, Insurtech.

JEL Classification: G23, G24, G28

Suggested Citation

Buckley, Ross P. and Arner, Douglas W. and Arner, Douglas W. and Veidt, Robin and Zetzsche, Dirk Andreas, Building FinTech Ecosystems: Regulatory Sandboxes, Innovation Hubs and Beyond (November 1, 2019). University of Luxembourg Law Working Paper No. 2019-010, European Banking Institute Working Paper Series 2019 – no. 53, UNSW Law Research Paper No. 19-72, University of Hong Kong Faculty of Law Research Paper No. 2019/100, Washington University Journal of Law and Policy, Vol. 61, 2020, Available at SSRN: https://ssrn.com/abstract=3455872 or http://dx.doi.org/10.2139/ssrn.3455872

Ross P. Buckley

University of New South Wales (UNSW) - Faculty of Law ( email )

Sydney, New South Wales 2052
Australia

Douglas W. Arner (Contact Author)

The University of Hong Kong - Faculty of Law ( email )

Pokfulam Road
Hong Kong, Hong Kong
China

HOME PAGE: http://hub.hku.hk/rp/rp01237

University of Hong Kong ( email )

Pokfulam Road
Hong Kong, Hong Kong
China

Robin Veidt

University of Luxembourg - Faculty of Law, Economics and Finance ( email )

4, rue Alphonse Weicker
Luxembourg-Kirchberg, L-2721
Luxembourg

HOME PAGE: http://https://wwwen.uni.lu/research/fdef/research_unit_in_law/people/robin_veidt

Dirk Andreas Zetzsche

Universite du Luxembourg - Faculty of Law, Economics and Finance ( email )

Luxembourg, L-1511
Luxembourg

HOME PAGE: http://wwwen.uni.lu/recherche/fdef/research_unit_in_law/equipe/dirk_andreas_zetzsche

Heinrich Heine University Dusseldorf - Center for Business & Corporate Law (CBC) ( email )

Universitaetsstr. 1
D-40225 Düsseldorf
Germany
+49 211 81 15084 (Phone)
+49 211 81 11427 (Fax)

European Banking Institute ( email )

Frankfurt
Germany

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