In the near future, young financial companies will be able to offer their services in Austria more easily than before.
In order to be able to bring innovations to market faster, selected FinTechs are allowed to try their offer with real customers under the supervision of the Financial Market Authority (FMA). A beta test for innovative financial services, quasi.
“Regulatory Sandbox” is the name of this way of enabling innovative business ideas. And Austria is one of the pioneers in the EU. In the next few weeks, the sandbox for FinTechs will be ready, revealed Finance Minister Hartwig Löger (ÖVP) the courier.
Then the first five startups will be able to experiment with real customers for half a year under the eyes of the FMA.
In these six months, it should succeed to accompany the FinTechs up to a full-fledged concession. If you can not do that, you have to stop using your service or continue working on improvements without Sandbox.
In the UK since 2015
The pioneer of this type of sandbox for young FinTechs is the UK. There has been a Regulatory Sandbox since 2016. In the last batch alone, 29 companies were allowed to test their service for six months under the supervision of the FCA.
Including established finance companies with a license, who only try new products. On the one hand, the Sandbox helped bring innovations to market faster and cheaper, according to a report released in 2017 after the first two batches. But even the regulator has learned to develop faster matching consumer protection measures for new financial products.
EU needs strong FinTech strategy after Brexit
After Britain leaves the EU, there is increasing pressure to establish sandboxes in other countries as well. There are currently such playing fields for FinTechs still in Denmark, Lithuania, Poland, the Netherlands and soon also in Austria, Spain, and Hungary.
The EU wants to accelerate this even more. The European Banking Authority (EBA) has therefore developed guidelines for FinTech Sandboxes and Innovation Hubs, which have been used by the five sandboxing countries. The report was published on Monday.
If indeed the FMA concession stands at the end of the sandbox participation of a FinTech in Austria (as the courier reported), this would be a novelty in the EU.
According to the EBA report, it is customary to let FinTechs “play” with real customers only if they obtain a license from the relevant regulatory authority – unless their service or product does not require such a license.
Riddle & Code in the Austrian Sandbox
In Austria, the startup Riddle & Code will be among the first startups to try out the new FinTech sandbox. Founded in 2016, founder Thomas Fürstner’s goal is to bring together blockchain technologies and the Internet of Things (IoT).
Own hardware and software should ensure that data can be transmitted securely and encrypted. Riddle & Code has projects in various areas, including energy or supply chains. One project concerns the financial sector and will now be tested in the sandbox: companies should be able to use capital tied up in commodities as a financing instrument.
Startup representatives advise finance ministers
In order to make the financial sector fit for digital business models, Minister of Finance Löger can be advised by its own advisory board. There, in addition to representatives of major banks, personalities from the Austrian start-up scene, among others Wikifolio founder Andreas Kern, Patrick Pöschl of Fintech Austria or Stefan Klestil of the venture capitalist Speedinvest.
Also published on Medium.