Spain’s Regulatory Sandbox

Spain has just passed a draft bill to create a Regulatory Sandbox. It is outlined that the supervisory oversight of the Sandbox will be undertaken by three regulatory agencies: The Bank of Spain, the National Securities Market Commission (CNMV), and the General Director of Insurance and Pensions.  However, the bill now has to continue its legislative process, of which changes could occur as it is a draft bill.

This draft regulation could play a major role in boosting Spain’s FinTech scene. There are currently over 300 FinTech Startups based in Spain. The Spanish FinTech ecosystem has seen a massive boost in the past few years. Some of the main industries which these spanish FinTechs have entered are crowdfunding, personal financial management, and enterprise financial management.

Sandbox Basics

The term Sandbox has become somewhat of a buzzword in the FinTech space, below we’ll explain more in depth about what it really is. The Regulatory Sandbox concept was first thought of by the UK’s former chief scientific adviser Sir Mark Walport. Sir Walport suggested that the financial services industry would benefit from having something equivalent to the clinical trials of the health and pharmaceutical sectors. This is essentially what a Regulatory Sandbox is – a ‘testing ground’ for innovative FinTech products. The primary aim of a Sandbox is to boost regulation to keep up with the accelerated pace of innovation.

Sandboxes are primarily for startups, who don’t have to be fully licenced, wanting to test out an innovative product. The testing stage normally runs for several months. This allows early-stage FinTech startups to launch and evaluate their products in a restricted market environment.

London FinTech

UK Sandbox Program – Main Takeaways

The UK implemented its Regulatory Sandbox program in 2016, it was the first of its kind. The Financial Conduct Authority (FCA) state that there have been many benefits from the regulatory Sandbox program. Examples being:

  1. Sandboxes have helped the governing bodies to understand up-and-coming technologies. This includes any risks that may come with them. These insights are uncovered before the technology hits the mass market, meaning they can prepare regulations.
  2. Startups build in safeguards for consumers at an earlier stage than normal.
  3. Access to the regulatory expertise offered by the Sandbox also reduces the cost and time for innovative ideas to get to market.
  4. Going through the Sandbox program helped startups to raise investment. A large factor for investors is the regulatory certainty of the startups. Taking part in the Sandbox reassures investors that the FCA’s oversight allows for regulatory alignment.

All the above have permitted for increased competition in the FinTech sector and has attracted foreign interest. To find out more in-depth about the insights that the UK has gained with its Sandbox check the full report here.

Spanish FinTechs

Spain is home to a number of innovative FinTech startups, one of which is Rebellion – a FinTech challenger bank aimed at teenagers. There are only a few players in the world tailoring their product to tackle this market. Furthermore, there is the upcoming launch of Fundsfy, they’re not your average FinTech challenger bank. Fundsfy is one of the only FinTech banks targeted solely at investors. They combine an array of WealthTech offerings with neo banking features. These are only two examples of how Spanish FinTechs are pushing ahead of the status quo in this nascent industry.

With the launch of a Regulatory Sandbox in Spain, we can expect FinTech startups like the above to thrive. Furthermore, by utilising the information uncovered by the supervising bodies, spanish regulations in this sector should become more favourable. This in turn can increase the appeal of launching a FinTech startup in Spain, in addition to attracting more foreign investment.