Fulfilling the mandate in the European Commission's March 2018 FinTech Action Plan, the Joint Committee of the European Supervisory Authorities has published a report on regulatory sandboxes and innovation hubs, together referred to as innovation facilitators. Innovation hubs are a dedicated point of contact for firms raising queries with national regulators on FinTech-related issues. Regulatory sandboxes enable firms to test innovative financial products, services or business models under the supervision of a national regulator.

The ESAs' report states that most EU member states have one or both forms of these innovation facilitators. The facilitators operate at national level and the ESAs identify this as a potential challenge to the EU objective of scaling-up FinTech. For example, national regulators are likely to adopt different approaches to the same innovation which can hinder opportunities for extending an innovation across the EU as well as present regulatory arbitrage risks. The potential absence of passporting innovative products throughout the EU can raise issues for their users.

The report provides a comparative analysis of the regulatory sandboxes and innovation hubs established in the EU, based on information provided by national regulators, financial institutions, FinTech firms and technology providers. It also summarizes some of the opportunities and challenges identified by respondents to the survey. For example, national regulators highlighted that providing one comprehensive response to a query was sometimes difficult where the issues cut across financial sectors, involving different regulators, or involved wider issues, such as data protection. The ESAs also outline best practices for the design and operation of innovation facilitators. The objectives of the best practices are to promote consistency across the EU in the design and operation of innovation facilitators, promote transparency of regulatory policy outcomes and to facilitate cooperation between the appropriate national regulators.

The report also discusses options that might be considered for future EU-level work on innovation facilitators to enhance cooperation between the national facilitators and support the scaling-up of FinTech across the EU. These include the development of joint ESA guidance on cooperation and coordination between the national innovation facilitators and the creation of an EU network to bridge innovation facilitators. The ESAs recognize that these options have their limitations in achieving the goal of scaling up FinTech across the EU, in particular because of the different approach of member states in transposing EU directives concerning the definition of financial instruments, financial services and conduct of business requirements. The ESAs intend to continue monitoring the development of innovation facilitators in the EU and will consider whether further action is appropriate.

View the report.

View details of the Commission's 2018 FinTech Action Plan.