Summary of regulatory sandboxes in Singapore and Thailand
1. Regulatory Sandbox Singapore for FinTech
Background
In 2015, Singapore designated financial IT (FinTech) as one of the nation’s top nine growth engines. Also, the Singapore government established the Financial Sector Technology & Innovation (FSTI) plan to invest 225 million Singapore dollars in FinTech over the next five years. In June 2019, the Monetary Authority Singapore (MAS) implement the regulatory sandboxes for financial to encourage more FinTech experimentation so that promising innovations can be tested in the market and have a chance for wider adoption in Singapore.
Objectives
The government aims to grow a smart financial center where innovation is pervasive and technology is developed widely to improve people’s lives, increase efficiency, manage risks, and create new opportunities from technologies in Singapore. To achieve the objectives, the regulatory sandboxes can help to encourage more FinTech experimentation in the financial sector with the support of MAS. The targets of regulatory sandboxes are Bank, Financial & non-Financial IT companies, and FinTech companies.
Operation
MAS has formed a dedicated team called ‘FinTech & Innovation Group (FTIG)’ for regulatory policies and development strategies. FTIG is consist of Payment Development and Data Connectivity Office (PDDC), FinTech Infrastructure Office (FIO), FinTech Ecosystem Office (FEO), and AI Development Office (AID). MAS supports the establishment of strategic planning related to regulation, policy, technology, and FinTech ecosystem, focusing on the six major technology: Mobile payment; Biometric authentication; Blockchain; Cloud; Big-data; and Machin-learning. Also, MAS develops policies and implementation strategies related to payment services, FinTech infrastructure, and promotes regulatory reform. MAS operates regulatory sandboxes that allow new services based on new technologies to be tested freely from existing regulations in a controlled environment.
Application and Approval process
The applicant company for sandbox should include technical innovation, impact on consumers or industries, clarity of result, risk assessment or clear transition strategy, etc. The applicants to regulatory sandboxes should go through three stages: Application Stage; Evaluation Stage; and Experimentation Stage. At the “Application Stage”, MAS reviews the proposals of a company and determines whether the proposals submitted are suitable for the sandbox and notifies the applicant within 21 business days. Then, at the “Evaluation Stage”, MAS evaluates the application on its completeness, complexity, and the specific legal and regulatory requirements involved. MAS determines the approval or failure of the application. If the application is rejected, the applicant may re-apply for the sandbox when it is ready to meet the evaluation criteria. Finally, at the “Experiment Stage”, the approved applicant can launch the service or product in a sandbox. The sandbox identity should disclose the main risks and notify its customers that the financial service is operating in a sandbox. In the end, MAS decides whether to extend the sandbox period, expand a broader scale, or fail of the application business.
Master Plan
Singapore’s goal is to become an Asian FinTech hub through innovative regulation and the best infrastructure. MAS believes that a key driver to transforming Singapore into a smart financial center is the regulatory environment that supports the innovative use of technologies for the economy. So, MAS tests the marketability of new FinTech-related services and implements financial-focused regulatory sandboxes that enable FinTech experiments to be applied to reality.
2. Regulatory Sandbox in Thailand for FinTech
Background
Thailand’s mobile penetration rate has already surpassed the population since 2010, and Internet usage Is the leading figure in ASEAN. As part of the Digital Economy policy, Thailand recognized the importance of fostering start-ups and FinTech industries based-on new technology. Furthermore, Thailand promotes the organization and system maintenance of related organizations. Starting in 2016, the startup industry has expanded in earnest with the government’s aggressive move to foster startups. Thailand's government has created a national-lever FinTech roadmap to foster the FinTech industry. Then, the Bank of Thailand (BOT) established a regulatory sandbox in December 2016.
Objectives
The aims of a regulatory sandbox in Thailand are three things: Promoting financial innovation; Protecting consumer rights; and Containing acceptable risks. Also, the FinTech department of Thailand considers data analytics, artificial intelligence, cloud computing, and blockchain as key technologies for the FinTech industry. Through these new technologies, they want to grow the FinTech services or products like Robo-advisor, Crowdfunding, Blockchain for Settlement.
Operation
The government and the private sector have formed a committee together to ensure that the FinTech sector is protected when related legislation or regulations are made. Also, the Thailand government organized the Thai Fintech Association (TFA) which has a mission to drive the financial technology industry in Thailand in July 2016. Besides, TFA initiated the F13 to accelerate FinTech industry development and make a testing lab for fintech startups. F13 is a sandbox for FinTech startups to test and validate their products and services with real customers. For the role of the sandbox, F13 is trying to encourage more FinTech experimentation to boost the economic growth as a whole, develop a regulatory environment that is conducive for innovating use of technology, manage customer risks by experimenting within a well-defined space and duration, and take a major role to connect FinTech startup to the regulatory sandbox. if the applicant is supported by F13, all of the cost from F13 is free including infrastructure and data.
BOT may exempt applicants from specific regulations for the duration of the sandbox, allowing applicants to test their innovative financial products and services in a live but limited environment, without being fully subject to all requirements that are normally applicable, For BOT, it allows them to facilitate financial innovations while still ensuring consumer protection and financial system stability.
During the test in sandboxes, applicants must demonstrate sufficient consumer protection measures, risk management, and disclosure of information, including that it is a test in the regulatory sandbox, as well as compliance with other applicable laws. Moreover, they will have to submit a report to BOT on test results, indicators, statistical data, information on risks or errors, or the occurrence of dishonest acts or complaints received from consumers as frequently as mutually agreed upon, during the test and after the test is completed.
Application and Approval process
For BOT’s regulatory sandbox, applicants can be financial institutions and should also be offering products relating to borrowing/lending, payment, other similar financial transactions or related innovation, or any other financial transactions approved by BOT.
An applicant must submit the application form and a complete set of supporting documents/information, such as technologies to be used, the scope of the test, innovation tests or research results, benefits to the service providers, consumers and financial systems, consumer protection measures and regulatory requirements that the applicant wants to be relaxed, with supporting reasons, to BOT.
BOT emphasizes that products or services must be innovation involving new technology not already available in Thailand or that will enhance the efficiency of existing products or services. They will look at the applicant's need for the sandbox and evaluated the research demonstrating the feasibility of the products or services. BOT will also look at how the product or service will be beneficial for the ecosystem. The consideration process will take no longer than 45 business days from the date on which BOT receives the application and a complete set of supporting documents.
The duration is as specified by the applicant in its test plan approved by BOT, which should not be more than one year. However, BOT will consider granting an extension to the test period, provide that the applicant applies for an extension no less than 30 days before the expiration date, specifying the reason for and period of the extension. The lenient rules will expire unless an extension period is granted. If the test results meet the goals initially presented to BOT, the participant must apply for permission to offer the service or introduce the product as required by the law. If goals are not met, or the applicant fails to comply with the conditions agreed to during participation, the applicant must stop its service after notifying its consumers and submit a report detailing the cessation of services to BOT.
Master Plan
The main goal is to facilitate access to financial institutions and financial services for everyone as a hub for financial. Also, the vision is to encourage innovation in the FinTech industry to promote economic growth, create an exemplary environment to promote innovative use of technology, manage consumer risks through well-organized space and long-term experiments, and play a leading role in liking FinTech startups to these sandboxes.
3. Regulatory Sandbox in Thailand for 5G business
Background
In August 2019, the National Broadcasting and Telecommunications Commission (NBTC) announced a regulatory sandboxed related Fifth Generation (5G) business to facilitate technology testing for business and in preparation for the adoption of 5G technologies in Thailand. Relaxed regulations should be introduced to temporarily dictate technology development and testing within a limited boundary in which all related sectors can control and monitor frequency utilization before obtaining a finished commercial product that can be subject to general regulatory procedures. NBTC has launched a ‘Notification Compliance Manual regarding Criteria for Permitting Frequency Use for Innovation Development and Testing’ in the regulatory sandbox. It provides chances for companies to develop and test their innovations in the temporarily assigned area where regulations are relaxed and regulatory operational steps are limited to the minimum necessary.
Objectives
Through the regulatory sandboxes, NBTC and applicants can develop new technology, share the spectrum between technologies, and test the network system before releasing to market and consumers. Also, it is important to find the optimal parameter for sharing and compatibility to separate the distance between Fixed Satellite Service (FSS) and International Mobile Telecommunications (IMT) stations, guard band, and apply a filter for interference mitigation.
Operation
NBTC is responsible for granting permission consent for regulatory guidance and utilization of frequencies in the sandbox whereas Office of NBTC is responsible for granting permission consent for using frequencies in innovation development and testing in the sandbox as well as ensuring the compliance of all activities undertaken in the sandbox under the specified conditions. Moreover, there are five testbeds, Chiang Mai, Khon Kaen, Bangkok, Eastern Economic Corridor (EEC), Songkhla (Hat Yai). In the case applicants have been authorized to use frequencies for innovation development and testing in the sandbox, they will be exempted from what specified below: Fees on using frequencies for innovation development and testing; Licenses for possessing, using, and producing radio-communication equipment and licenses for setting up radio-communication bases in the sandbox as well as associated fees; and Conformity assessment for radio-communication equipment, related accessories, and other associated frees. As the permission, the applicant will be able to get benefits of sandbox for up 720 days. The principle of the regulatory sandbox is based on regulatory procedures as well as guidance on the sandbox application process and the process in which sandbox participants request to use the sandbox for innovation development and testing.
Application and Approval process
Sandbox operator refers to an entity, which has received approval from NBTC to utilize an area for frequency testing and use according to the Sandbox Notification. Also, the Sandbox license holder refers to a participant in the sandbox who has received a license from NBTC for frequency use within the sandbox area.
Any sandbox operator wishing to establish a sandbox area must satisfy the requirements and submit a Letter of Intent and a sandbox operational plan to NBTC. If the sandbox operator is approved, NBTC informs the public on sandbox detail condition. Then, the applicant who wants to be a sandbox license holder submit a proposal to the sandbox operator and is granted permission. The applicant should have one of the following objectives for granting permission: Research and develop new technology; Test for interference or shared use of a spectrum between different technologies; or test the network system before commercial use. Finally, the applicant also has to submit a proposal to NBTC. As approved, NBTC will disclose a list of licenses in the sandbox area.
Master Plan
NBTC has a plan to test 5G technology in the regulatory sandbox for 2019, 2020, and will deploy and commercialize 5G business to market.
Implication
Through the three regulatory sandboxes cases, it was further emphasized that the fostering new technologies is important for economic development. Singapore is growing its new technology industry through massive government subsidies along with improved regulation sandbox. Singapore established a plan to foster Singapore as a Fintech hub in Asia, with its geographical location and advanced financial services as an advantage. Also, although Thailand was perceived as a tourist country, it is now preparing to emerge as a FinTech hub in Asia by fostering technology industries and startups.
In particularly, both countries have a one-stop support system, including technology development, start-up support, regulation reform, making service or product, and business expansion, beyond simply easing regulations in the regulatory sandboxes. Also, more efficient support policies are being implemented by subdividing, systematizing, and upgrading government organizations related to regulatory sandboxes.
The government should not only reform regulations but also create an ecosystem where companies can expand innovative technologies into business.
References
Settapong Malisuwan, Chirasil Chayawan, and Wassana Kaewphanuekrungsi (2020), “Establishment of Regulatory Sandbox: A Case Study of Thailand’s Regulatory Sandbox”, International Journal of the Computer, the Internet and Management Vol.28 No.1 (January-April, 2020) pp. 84-91
Financial Technology Department of Bank of Thailand (2018), “Payment & Fintech Development in Thailand”, 16 April 2018
Nattira Chirasavinuprapand (2017), “Regulatory Sandbox: Thailand’s experience”, FinTech Department Securities and Exchange Commission, Thailand, 09 May 2017
Singapore Management University (2018), “Singapore approach to develop and regulate FinTech”. Available at https://ink.library.smu.edu.sg/lkcsb_research/5911
ITU-NBTC International Training Program (2019), “Regulatory Enablers for Digital Transformation”, 06 September 2019
Jayoung James Goo, Joo-Yeun Heo (2020), “The Impact of the Regulatory Sandbox on the Fintech Industry, with a Discussion on the Relation between Regulatory Sandboxes and Open Innovation”, MDPI, 18 June 2020. Available at https://www.mdpi.com/2199-8531/6/2/43
Monetary Authority Singapore (2016), “FINTECH REGULATORY SANDBOX GUIDELENS”, November 2016