Nicole Sandler is a lawyer in the Global Regulatory Policy team at Barclays. She currently focuses on the future impact of fintech related regulation and initiatives on Barclays in the UK and globally, including advising on various regulatory initiatives proposed by regulators such as the FCA, MAS and the CFTC. Nicole engages with regulators both in the UK and globally on fintech matters for Barclays and represents Barclays in various regulatory forums and industry groups. For example, Nicole has been participating in the BBA Digital Strategy Group and also represented Barclays at the EDCAB virtual currency and blockchain roundtables at the European Parliament.

How would you explain a sandbox, or sandboxing, to a layman?

In simple terms a sandbox is a ‘safe space’ for firms to test innovative solutions with guidance from regulators.

What are the advantages of regulatory sandboxes from a private company perspective?

I believe that one of the biggest reasons that companies enter a sandbox is because they want to understand if they can put a product out into the market and they want to have a relationship with the regulator to see if their product will satisfy regulatory requirements and be viable in the real world.

If a private company wishes to innovate, they should aim to make sure that they understand how their use case fits with regulation.

For regulators, sandboxes could provide an opportunity to fully understand different innovations because the sandbox environment provides them with the opportunity to work closely with industry experts.

Sandboxes were created based on the idea that regulators would be able to fully understand the technology if they have also explored that space and worked closely with industry experts. Is this the case?  

This was certainly a core objective of sandboxes from a policy perspective.

One of the key reasons sandboxes were created was to help a regulator understand specific use cases and ultimately ensure consumer protection and mitigate market risks from new technology, while also encouraging innovation which serves the interest of the entire market, including consumers.

This remains a stated objective.

One of the biggest reasons for companies to enter a sandbox is because they want to understand if they can put a product out into the market. If you take part in a sandbox does this automatically give you a stamp of approval? Does a sandbox give competitive advantage?

The regulators often stress that by entering the sandbox they are not endorsing that product or company (and certainly not giving it a badge of approval). A Deloitte study in 2018 found there were many reasons companies applied to the FCA’s sandbox.

“Unsurprisingly, several firms wanted to use the sandbox primarily to understand how regulatory requirements would apply to their innovative services or products, and/or what type of authorisation they might need, if any. Others thought that testing in the sandbox would speed up the creation of a minimum viable product; and some others wanted to take advantage of the opportunity to test their product live with real customers.”

The Financial Conduct Authority (FCA) is taking regulatory sandboxing global to enable fintech innovation in emerging markets. How do you see this evolving? 

Collaboration is key for innovation. The Global Financial Network (GFIN) is a great example of cross border collaboration amongst policymakers. A global sandbox would allow firms to work with lots of different people/firms, cross-industry but also cross-border, and, via both the global sandbox and GFIN knowledge hub, to identify where different jurisdictions’ regulatory requirements differ with respect to a specific use case.

Fintech does not understand borders. Industry players want to be working closely with a number of regulators and policymakers and want regulators and policymakers to be working together. That is why we believe that it would be valuable for sandboxes to be more global. Education is also key, it is important that the policymakers involved in testing in sandboxes can learn from the experiences of other jurisdictions.

What key lessons have been learnt from the public and private sectors working together when it comes to regulation? 

Collaboration is key for innovation and education is essential.

In order to have effective regulation one needs to understand the use case that is being regulated and the best way to do this is for regulators and industry to leverage each other’s diverse knowledge.