Sri Lanka central bank’s fintech sandbox earns praise
ECONOMYNEXT – A top economist and ex-Central Bank official has praised a move by Sri Lanka’s financial sector regulator to create a ‘regulatory sandbox’ to test fintech (financial technology) innovations.
The Central Bank’s move enables financial institutions to experiment with new financial technologies without running the risk of getting caught for violating regulations pertaining to the sector, said W A Wijewardena, a former Deputy Governor of the Central Bank,
“ . . it will pave way for Sri Lanka to join the exclusive club of countries that have attempted to bring about a healthy marriage between regulators and innovators,” he said in an opinion column in the DailyFT newspaper.
“Sri Lanka has joined the fray at a time when many countries in the world are racing to gain membership of this club.”
A regulatory sandbox is a virtual space in which new or untested software or coding can be run securely.
Wijewardena said the sandbox idea comes from the children’s learning game involving a box or a pit filled with sand where children use the sand for coming up with new creations like castles or statues.
“They are watched from a distance by elders, but there is no interference or guidance by them in close range,” he said.
“Thus, the normal disciplinary code which is applied to children’s other work is taken out, and they have full freedom to do what they like to do within a given time space.”
The central bank announcement said that with the rapid growth in FinTech innovations in the country, its Payments and Settlements Department has identified the need to provide an environment that nurtures and promotes their advancement whilst maintaining appropriate regulatory standards.
The sandbox aims to encourage and enable FinTech initiatives that promote efficiency and increase access to financial products and services.
“A FinTech Regulatory Sandbox provides a safe space in a controlled environment for selected innovators to test their products and services, without the risk of infringing on regulatory requirements,” the bank said.
“This process provides innovators with an opportunity to better equip themselves to seek regulatory approval. It is intended that this process would create robust and sustainable innovations that can provide more efficient financial intermediation, greater financial inclusion, and create a less-cash society through digitalisation.”
The Central Bank said it is in the process of determining the scope of the regulatory sandbox and adopting a participatory approach to engage stakeholders in order to identify market requirements.
(COLOMBO, May 14, 2018)