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Launching the Global Financial Innovation Network initiative

Watchdogs seek to harmonize frameworks for regulatory sandboxes and accelerate roll-out of new services

How can financial regulation keep pace with digital innovation? Regulatory sandboxes from Ontario to Australia are looking to shape new frameworks that foster the growth of fintech while mitigating the risks that disruptive technologies represent.

Key insights

  • The GFIN aims to establish joint policy work for watchdogs and harmonize regulatory approaches to emerging business models enabled by new technologies
  • The international body could potentially allow fintech firms to more seamlessly scale new products across multiple jurisdictions
  • Rapid developments in distributed ledger technology such as initial coin offerings have prompted greater urgency around the need for unified guidance on emerging business models and the regulation of securities

Breakthroughs in technology development rarely happen in isolation and advancements in artificial intelligence (AI), big data and blockchain will not be confined by regulatory jurisdiction. As a result, there is growing recognition that international co-operation is required to coordinate regulatory approaches between watchdogs and to leverage the insights they have gained.

In early August 2018, 12 financial regulators announced the creation of the Global Financial Innovation Network (GFIN).1 The aim of this initiative is to provide a more effective method for innovative fintech firms to interact with regulators and trial new products across multiple countries.

Creating a joint policy framework for watchdogs

Together, these regulatory bodies issued a consultation paper on the main functions for the GFIN. The three main objectives of the GFIN are to:

  • act as a network of regulators to collaborate and share experience of innovation in respective markets, including emerging technologies and business models
  • provide a forum for joint policy work and discussions
  • provide firms with an environment in which to trial cross-border solutions

Isolated sandboxes are hindering access to markets

International stakeholders responding to the consultation paper were supportive of the GFIN providing regulatory co-operation on common challenges or policy matters that firms confront across different jurisdictions.They claimed that one of the main advantages for the global sandbox could be reducing the time it takes to bring ideas to new markets. Potential firms hoping to apply for cross-border testing were also keen to highlight the importance of the project being transparent and fair supported by a consistent governance framework. “The establishment of the GFIN can help share the experiences and knowledge from across different markets, while also providing a platform for innovative firms wishing to scale their propositions via testing in multiple countries," said Christopher Woolard, the Financial Conduct Authority's (FCA) Executive Director of Strategy and Competition and Board member.3

The aim of this initiative is to provide a more effective method for innovative fintech firms to interact with regulators and trial new products across multiple countries

The FCA are actively engaged in understanding and harnessing the benefits of innovation in financial services. The creation of financial products could offer a new avenue for growth in commercial banking and provide consumers with more manageable services, but watchdogs around the world are keen to ensure that the potential harm of these innovations is adequately safeguarded.

GFIN to establish clearer guidance for emerging business models

With GFIN, fintech firms
will have 'regulatory connectivity' to
multiple markets

The significant emerging innovation trends within financial services are increasingly global rather than domestic, increasing the need for clear guidance on emerging business models. The GFIN aims to harmonize regulatory approaches surrounding how new technologies such as AI and big data are reshaping the demands on data protection, know your customer checks and anti-money laundering protocols. In particular, distributed ledger technologies have prompted regulatory divergence in how new types of securities are regulated, such as has been seen with initial coin offerings. Richard Teng, CEO of the Abu Dhabi Global Market regulatory authority, notes that, “With GFIN, fintech firms will have 'regulatory connectivity' to multiple markets at once. It is a powerful enabler to assist innovative firms in complying with multiple jurisdictions' regulatory requirements and deliver safe and effective innovative products."4

The creation of the GFIN is an important next step for organizations that are actively engaged in understanding and harnessing the benefits of innovation in financial services for consumers and helping mitigate any potential harm. By more broadly sharing the experiences and knowledge across different markets, it is hoped that the GFIN will serve as a useful platform for innovative firms aiming to scale their propositions and allow them to responsibly test new products across multiple countries.

GFIN Membership5

Abu Dhabi Global Market (ADGM)

Financial Conduct Authority (FCA, UK)

Autorité des marchés financiers (AMF) (Québec, Canada)

Guernsey Financial Services Commission (GFSC)

Australian Securities & Investments Commission (ASIC)

Hong Kong Monetary Authority (HKMA)

Central Bank of Bahrain (CBB)

Monetary Authority of Singapore (MAS)

Bureau of Consumer Financial Protection (BCFP, USA)

Ontario Securities Commission (OSC, Canada)

Dubai Financial Services Authority (DFSA)

Consultative Group to Assist the Poor (CGAP)

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