Supervisory Sandboxes In Hong Kong To Facilitate Fintech Innovations
The Government and the regulators in Hong Kong have been encouraging financial institutions to make use of Fintech and supporting initiatives that drive Fintech adoption and innovations. The Hong Kong Monetary Authority (HKMA), the Securities and Futures Commission (SFC) and the Insurance Authority (IA) are keeping their policies and processes up-to-date in the light of market trends.
The Sandboxes are one of the tools of the regulators to allow financial institutions to gather real-life data and user feedback on their Fintech products/services in a controlled environment. Financial institutions can then make suitable refinements to their Fintech products/services to expedite the eventual full launch.
Financial institutions intending to access the Sandboxes are advised to get in touch with the regulators below:
The Fintech Supervisory Sandbox (FSS), launched by the HKMA in September 2016, allows banks and their partnering technology firms (Tech firms) to conduct pilot trials of their Fintech initiatives involving a limited number of participating customers without the need to achieve full compliance with the HKMA's supervisory requirements. This arrangement enables banks and Tech firms to gather data and user feedback so that they can make refinements to their new initiatives, thereby expediting the launch of new technology products, and reducing the development cost.
In the light of the experience obtained in operating the FSS, the HKMA intends to upgrade the FSS to an enhanced version. New features are being considered: (i) a Fintech Supervisory Chatroom will be set up to provide supervisory feedback to banks and Tech firms at an early stage of the development of their Fintech products; and (ii) tech firms may have access to the sandbox by seeking feedback from the Chatroom without necessarily going through a bank.
The Securities and Futures Commission (SFC) is an independent statutory body that regulates Hong Kong's securities and futures markets. The SFC has the duty to maintain Hong Kong’s status as a competitive international financial centre, which involves promoting high-quality markets and facilitating the rapid changes affecting the financial industry such as technological transformation.
The SFC recognises that firms utilising innovative technologies may broaden investor choice and benefit the Hong Kong financial services industry. The launch of the SFC Regulatory Sandbox is to provide a confined regulatory environment for qualified firms to conduct regulated activities utilising financial technologies. The sandbox aims to enable qualified firms, through close dialogue with and supervision by the SFC, to identify and address any risks or concerns associated with their regulated activities before their services can be provided to the wider public in Hong Kong. Market practitioners in the securities and futures sector can click the button below to contact the SFC for further details about the SFC Regulatory Sandbox.
The Insurance Authority (IA) is firmly committed to building and sustaining a regulatory environment conducive to business development and embracing technology. Against this background, the IA has launched an Insurtech Sandbox to facilitate pilot runs of innovative Insurtech applications by authorized insurers to be applied in their business operations.
The Insurtech Sandbox helps authorized insurers experiment with new Insurtech and other technology applications without the need to achieve full compliance with the IA’s usual regulatory requirements. Under the Sandbox initiative, pilot trials of Insurtech applications will be conducted in a controlled environment with sufficient safeguards for policy holders. Insurers can gain real market data and collect user feedback before their formal launch in the market.
If a financial institution intends to conduct a pilot trial of a cross-sector Fintech product/service, it may approach the most relevant regulator. The regulator will act as the primary point of contact and assist in liaising with other regulators for the financial institution to access the Sandboxes concurrently.
Invest Hong Kong (InvestHK) is the Hong Kong Special Administrative Region (HKSAR) Government Department responsible for Foreign Direct Investment. It has set up a dedicated Fintech team in Hong Kong with correspondents located in London and San Francisco. It aims at attracting top innovative Fintech enterprises, start-up entrepreneurs, investors and other stakeholders from all over the world to Hong Kong and assisting them to establish their presence here.
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