Abu Dhabi Global Market (ADGM) has launched ‘Digital Sandbox’ – a new cloud-based environment for fintechs, banks and others to co-create and test products with regulatory guidance in order to deliver better services to clients.
The Digital Sandbox is intended to ease the way fintech start-ups communicate with banks on their services and products and with regulators on their rules by connecting all three parties digitally and in real time. It has a framework and process that facilitates and encourages the development of the fintechs in a safe, measured and pragmatic manner.
The Financial Services Regulatory Authority (FSRA) previously introduced a regulatory lab, the Abu Dhabi Global Market RegLab, in 2016. Since that time 26 fintech start-ups have been accepted into the ADGM RegLab in three cohorts.
Ahmed Al Sayegh, UAE minister of state and executive chairman of ADGM, said the digital sandbox would replace this programme as part of a move “from analogue to digital”. In order to stay globally relevant “we have to act now, and we have to act together”, he said.
Wai Lum Kwok, senior executive director of the Capital Markets Financial Services Regulatory Authority, ADGM, said the digital sandbox would be open to both local and international fintech start-ups, calling the previous model ineffective.
“We have invited potential fintech start-ups to come and test their solutions with us and for us to supervise and grant them license to do, which will enable them to test their solutions with the wider market.
“With the Digital Sandbox we are able to connect the start-ups with the banks and financial institutions, and with that comes a true digital environment and connectivity. As the regulator we will be able to see and monitor in real time what they are offering, making the collaboration much more effective,” he said.
Kwok added that it was important for ADGM as a regulator to be on top of the latest technological developments being made in the fintech sector, better helping them with regulatory measures.
“As a regulator we cannot be in a situation where we don’t know what is happening. Being able to plug in and monitor in real time what is happening is a very important part of our development, and will assist us in our regime on digital banking, digital securities and crypto currency frameworks,” he said.
Fintech is booming in the Middle East and North Africa (MENA) region. A total of US$237 million has been invested in MENA’s fintech start-ups through 181 deals, representing 7% of the total MENA start-up funding between 2015 and 2019 year-to-date (YTD), according to the MENA Fintech Venture Report 2019 compiled by investment data platform Magnitt for the ADGM.
The ADGM Digital Sandbox is now open for member applications. It does not require participants to be based in Abu Dhabi, nor are they required to have physical office space.