A controlled and cost-effective means of road-testing new fintech concepts within safe parameters has been proposed for the United Arab Emirates (UAE).
As announced on 10 May, the Regulatory Laboratory – ‘RegLab’ for short – would grant each, novel fintech venture a two-year window for developing, testing and launching its product or service to ensure that it is viable for full market activity.
RegLab has emerged from the Financial Services Regulatory Authority (FSRA), a division of local watchdog Abu Dhabi Global Market (ADGM). In a consultation paper published alongside the announcement, the FSRA explained:
“From [our] perspective, we seek to establish sound regulation of a high standard that promotes stable and sustainable development of the financial services sector, while accommodating well-managed risk taking and innovation.”
It added: “New entrants with untested business models pose a threat to the safety and soundness of the financial system due to new risk exposures. Our challenge, therefore, is to address the risks of testing novel solutions on consumers in a manner that does not undermine the stability of our financial system.
“For any particular technology used, we recognise that the nature, benefits and risks can be very different. As such, there cannot be a ‘one-size-fits-all’ approach.”
The paper noted that, in order to build a thriving climate for fintech within the Gulf Cooperation Council, FSRA has worked with local and international stakeholders to determine three, key objectives:
With those goals in mind, RegLab will be supported by an online knowledge centre, designed to provide market entrants and stakeholders with all the information they need on the various compliance requirements they should satisfy.
Meanwhile, Abu Dhabi’s FSRA will form strategic partnerships with start-up accelerators and universities to foster a climate of innovation and provide the RegLab with a food chain of projects to develop.
ADGM chairman His Excellency Ahmed Al Sayegh said: “By providing fintech participants the certainty of obtaining relevant regulatory approvals on a stable platform where they can test or deploy new technologies, the RegLab draws on a holistic approach to support Abu Dhabi’s vision of developing an innovative financial services sector that is underpinned by robust regulatory principles.
“Together with our partners and key stakeholders, ADGM aims to develop an environment that harnesses fintech’s potential to increase efficiency, widen consumer choice and facilitate better risk management in the financial services industry within Abu Dhabi and the GCC region.”
Read the full consultation paper and find out how to respond