Czechia looks to regulatory sandbox to boost fintech innovation
Czechia is already home to a number of successful fintech start-ups. The launch this week of a project that could lead to the establishment of a regulatory sandbox might foster even more.
The Czech Finance Ministry this week launched a project to unlock the potential of fintech applications and the use of data in financial services in country.
The project, financed by the European Union through the Technical Support Instrument (TSI) and implemented by the Organisation for Economic Co-operation and Development (OECD), in cooperation with the European Commission’s Directorate-General for Structural Reform Support (DG REFORM), will encompass a feasibility study on the potential of data in financial services and the possible establishment of a sandbox in Czechia to allow fintech innovation on the basis of data sharing and usage.
A similar sandbox in Lithuania, launched in 2018, has been instrumental in its own emergence as a key European fintech hub.
According to Czechia’s deputy finance minister, Jiří Georgiev, “the Czech financial authorities understand the priority of fostering fintech innovation, as a way to drive productivity gains, create jobs and promote economic growth, encourage competition in financial services, but also as a way to allow consumers better control and better use data potential”, adding that “this project shall bring resources to unleash wide scale of data usage for our citizens, financial markets, and our economy.”
The importance of digitalisation
Czechia is already home to a number of impressive fintech start-ups, including Twisto, a lender, and Resistant AI, which offers AI-enabled know your customer (KYC) and anti-money laundering (AML) solutions for financial institutions and which in October last year raised more than 14.28 million euros in Series A funding.
Now, the Czech Finance Ministry wants more.
The Ministry of Finance director leading the project, Alex Ivančo, says that “unleashing the potential of data is the way for Czechia and Europe to thrive in this new digital era.”
European Commission Director-General Mario Nava adds that the Commission has long recognised the critical importance of digitalisation.
He says that fintech is an important tool to improve the efficiency of the financial sector, all the more so in the context of the digitalisation trend and of the Covid-19 pandemic.
“The objective of this project is to contribute to the creation of an incentive ecosystem for fintech, for start-ups and incumbent firms,” adding that DG REFORM is this year launching a Supervisory Finance Digital Academy with more than 20 supervisory authorities of the EU, including the Czech National Bank.
Nava also highlights that “further promotion of fintech innovation has the potential to provide important benefits to the Czech economy. The sandbox will foster a better use of financial services by all economic actors, then enabling a significant growth potential for these markets, while regulating them, ensuring consumer protection, market integrity and financial stability.”
The role of sandboxes
Regulatory sandboxes allow existing and potential financial market participants to test their financial innovations in a live environment under the guidance and supervision of the relevant financial authorities, usually the national bank. But while sandboxes help fintechs, they also help the regulatory authorities, allowing then to learn about new trends and products, and to adapt their regulations accordingly.
The development of the Czech fintech sandbox is part of the digital pillar of the its National Recovery and Resilience Plan, which is focused on digital technologies and aims at creating sandboxes in regulated sectors in line with EU priorities.
The OECD Director for Financial and Enterprise Affairs, Carmine Di Noia, says that the Czech project will support policies that promote fintech innovation with a focus on data, that maximises the benefits of the digital transformation for the Czech economy, while managing the risks and unintended consequences for financial markets, consumers, and the economy.
“Sandboxes across Europe and the world have proven to be one important avenue for financial authorities to accompany the development of innovative financial solutions in a safe and controlled manner,” he says.
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Czechia looks to regulatory sandbox to boost fintech innovation was originally published on Emerging Europe.