March 25, Colombo (LNW): The Central Bank (CB) is set to reevaluate the regulatory sandbox framework, considering adjustments to ease certain stringent regulations, following a lack of significant engagement from fintech players over the past four years.
Manisha Wimalasuriya, Additional Director of the CB Payments and Settlements Department, revealed that the CB has received approximately six applications thus far, with the most recent one focusing on artificial intelligence (AI).
Speaking at the BankTech Asia 2024: Colombo Series event last week, Wimalasuriya highlighted challenges faced by fintech firms, noting that the requirement for an audit report posed financial burdens.
Fintechs were hesitant to invest in costly audits without certainty of market release for their products.
The CB initially introduced the regulatory sandbox as a platform for fintech experimentation, aiming to facilitate innovative financial solutions that could be deployed to the market after thorough testing and approval.
Objectives included fostering efficient financial intermediation, enhancing financial inclusion, promoting digitisation to reduce cash reliance, improving accessibility and security of financial services, and mitigating regulatory uncertainties for fintech firms.
Acknowledging that certain requirements, such as third-party audit reports, hindered fintech participation, Wimalasuriya emphasised the need for adjustments to encourage experimentation in the sandbox.
Participants are presently mandated to provide verification of test results conducted by a reputable independent third-party auditor alongside their sandbox application.
This requirement ensures that the proposed solutions have undergone comprehensive testing.
Considering alternative approaches, Wimalasuriya mentioned India’s Reserve Bank (RBI), which only necessitates Proof of Concept (POC) from participants.
She suggested that the CB may consider a similar approach, taking cues from India’s successful emergence as a hub for fintech innovation and entrepreneurship facilitated by its FinTech Sandbox in recent years.
