Ten fintech startups slated for sandbox by SEC

Ten Thai innovative startups were selected as winners of the FinTech Challenge Awards and are slated to be among the first group of startups allowed to participate in the regulatory sandbox next year by the Securities and Exchange Commission (SEC), which is seeking to promote financial innovations while also managing risks for consumers.

The 10 startups were Aborrow, C3 Finance, CoinEx, Fund Radar, Peer Power, Pet Insure, Private Chain, SmartContract Thailand, Jub-Jai and San-Fun. The startups developed technologies and competed in one of three categories: blockchain technology, financial inclusion (using tech to allow the public to access financial services) and regtech (technology to help the corporate finance business become more efficient).

“The fintech industry in Thailand has rapidly grown since 2014, with startups securing major venture capital investments and partnerships,” wrote the Singapore-based Fintech News website in September. “Local banks such as the Siam Commercial Bank launched various fintech-focused investment programs and venture capital funds to assist entrepreneurs in their early stages to lead the local fintech market.”

The SEC launched the FinTech Challenge Program in late October, in cooperation with the Bank of Thailand, the Office of Insurance Commission, the Stock Exchange of Thailand, Software Park Thailand, the National Innovation Agency, C ASEAN and the Thai FinTech Club. Its stated purpose is “to promote tangible creation of innovative products and services in the financial, investment and insurance industries.”

The challenge for the SEC along with the Thai government and other financial regulatory bodies, however, is how to regulate fintech; new financial technologies that are rising rapidly around the world. On the one hand, these technologies make online financial transactions faster and more efficient while opening up new opportunities for growth. On the other hand, they present potential risks to both institutions and consumers, some of which are not yet clear because the technologies are still young.

“As a regulator, we need to look at how we can make these things occur – the world is changing. Will we slowly adapt to it, or jump right in?’’ said Sarica Apiwatthakakul of the SEC. “The regulator’s challenge is that we won’t be able to move slowly anymore. I believe it is an excellent chance that we can work closely together with startups to break into a better system,” she said.

One solution to the regulators’ dilemma has been to develop a regulatory sandbox, a solution that has also been applied in other countries. The regulatory sandbox aims to create a ‘safe space’ in which businesses can test innovative products, services, business models and delivery mechanisms in a live environment without immediately incurring all the normal regulatory consequences.

Thailand’s regulatory sandbox will be operational in the first quarter of 2017, and will be supervised by the central bank. A central bank official said the sandbox will help it share information about, and shape, regulation. Participants will be guided on how to develop products and services that comply with regulations, enabling them to quickly receive licenses.