Thinking out of the (regulatory sand)box – how Asian regulators can drive FinTech?
The financial services industry is international and so are innovations in financial services or FinTech.
And what better timing is there for local regulators to underscore the importance of international collaboration in positioning itself as an innovative and leading financial center than during the FinTech week?
Australia had its inaugural FinTech week, while Hong Kong and Singapore built on its prior year experience to create larger scale and more successful FinTech weeks.
In Hong Kong, the Hong Kong Monetary Authority (HKMA) announced FinTech collaboration with Singapore’s Monetary Authority of Singapore (MAS); and with Shenzhen’s Office of Financial Development Service (OFDS) in the areas of a FinTech competition to encourage cross-border collaboration, a mutual referral program to facilitate entering into each other’s market, and a talent development program to provide internships to broaden and deepen the talent pool. Earlier,
The other two key regulators in Hong Kong have not stand still with Securities and Futures Commission (SFC) announcing their regulatory sandbox for existing licensed corporations and start-up firms to test their internal controls and delivery of the financial services through FinTech, whereas the newly established (since 26 June) Insurance Authority (IA) announced its own InsurTech sandbox and a fast track pilot scheme for insurers purely using digital channels.
Interestingly, the initiatives taken by the local financial services regulators are addressing two key areas – the regulatory environment and access to talent - Hong Kong has been perceived as less supportive in a European Chamber of Commerce paper comparing Hong Kong with six other markets against the criteria of: 1) access to capital, 2) access to talent, 3) infrastructure, 4) regulation, 5) demand for FinTech start-ups, and 6) supply of FinTech start-ups. The paper – co-authored by undersigned - has been shared with the European Commission.
Regulatory Sandboxes in Asia – Australia, Hong Kong, Singapore, and the UK.
Let’s take a closer look at the sandboxes provided by Australia, Hong Kong, Singapore and the United Kingdom, where sandboxes not only help reduce time to market for financial institutions and FinTech firms, but also help regulators “think out of the box” in formulating their approach towards regulating the usage of emerging technologies in providing products and services.
The local legal and regulatory structure, maturity of the financial services industry and FinTech eco-system, and the government’s overarching objectives will ultimately drive the final shape and form of the ingredients of the different regulatory sandboxes, where success requires collaboration and understanding between the regulator, financial institutions, FinTech firms, and supporting organizations, both locally and globally.
Footnote: The article is based on the author’s interpretation of publicly available information and sources. If legal advice or other expert assistance is required, the services of a competent professional should be sought.
Article Written by Lapman Lee - Co-Chair, FinTech Association of Hong Kong
Lapman Lee is a Co-Chair at the FinTech Association of Hong Kong, and co-authored a paper on Hong Kong’s position as a FinTech hub for the European Commission in his role as a Financial Services Business Council member at the European Chamber of Commerce.
He advises banks and insurers on regulatory compliance related to conduct and prudential risks in his role as a Managing Director for Regulatory Consulting at a leading professional services firm.
Lapman is in an ongoing dialogue on FinTech, InsurTech, and RegTech with regulators such as the UK FCA and in HK with the HKMA, SFC, MPFA, and the Insurance Authority where he is a member of the Future Task Force of the Insurance Industry.
In addition, he is an honorary fellow of the Asian Institute of International Financial Law (AIIFL) of the University of Hong Kong where he regularly speaks on FinTech.