Regulatory Sandboxes and Fintech Funding: Evidence from the UK
BIS Working Paper, No 901
47 Pages Posted: 15 Dec 2020 Last revised: 21 Jun 2022
Date Written: June 1, 2022
Over 50 countries have introduced regulatory sandboxes to foster financial innovation. This paper conducts the first evaluation of their ability to improve fintechs' access to capital. Exploiting the staggered introduction of the UK sandbox, we establish that firms entering the sandbox see an increase of 15% in capital raised post-entry. Their probability of raising capital increases by 50%. Investigating the mechanism, we present evidence consistent with the sandbox reducing asymmetric information and regulatory costs. Sandbox entry also has a significant positive impact on survival rates and patenting.
Keywords: fintech, start-ups, venture capital, innovation
JEL Classification: G24, G38, M13, O38
Suggested Citation: Suggested Citation