Singapore Fintech Regulatory Sandbox

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The FinTech Regulatory Sandbox is an initiative that allows FinTech startups to test innovative financial products and services in a well-defined, live environment with appropriate safeguards.
What are the main aims and objectives?

The main objective of the FinTech Regulatory Sandbox is to encourage and enable experimentation and innovation in the financial sector while still ensuring that consumers are protected. The Sandbox provides a safe environment for FinTech startups to test their innovative financial products and services with appropriate safeguards. The Sandbox is part of the MAS's broader Smart Financial Centre initiative, which aims to position Singapore as a leading financial center by using technology and innovation to increase efficiency and reduce risks in the financial industry. To this end, the sandbox can help to encourage more FinTech experimentation where MAS will provide the requisite regulatory support, so as to: 

  • Increase efficiency 

  • Manage risks better 

  • Create new opportunities 

  • Improve people’s lives 

How does the program work?

Financial institutions in Singapore are already free to launch new financial products, services or processes without seeking permission from MAS, provided that they have carried out due diligence tests and there is no breach of legal and regulatory requirements. However, emerging financial services that utilise FinTech are becoming more complex and there can be uncertainty over whether the innovation falls within regulatory requirements.  

To address this challenge, the Monetary Authority of Singapore (MAS) is encouraging more FinTech experimentation so that promising innovations can be tested in the market and have a chance for wider adoption, in Singapore and abroad.  

Financial institutions - or any interested firm - can apply to enter a regulatory sandbox to experiment with innovative financial services in the production environment but within a well-defined space and duration. The sandbox includes appropriate safeguards to contain the consequences of failure and maintain the overall safety and soundness of the financial system. 

Successful applications to the sandbox the proposed service must meet the following criteria: 

  • Includes new or emerging technology, or use existing technology in an innovative way 

  • Addresses a problem or brings benefits to consumers or the industry 

  • Demonstrates the intention and ability to deploy the proposed financial service in Singapore on a broader scale after exiting the sandbox 

  • Clearly defines the test scenarios and expected outcomes of the experimentation and agrees a reporting schedule with MAS 

  • Clearly defines the appropriate boundary conditions for the sandbox to be meaningfully executed while protecting the interests of consumers and maintaining the safety and soundness of the industry 

  • Assesses and mitigates significant risks arising from the proposal  

  • Clearly defines and acceptable exit and transition strategy in the event the proposed service has to be discontinued or can proceed to be deployed on a broader scale 

Applicants can expect to hear a response within 21 working days. To read more about the application and approval process see here.  

Depending on the financial service to be experimented, the applicant involved and the application made, MAS determines the specific legal and regulatory requirements which it is prepared to relax for each case.  

At the end of the sandbox period, the legal and regulatory requirements relaxed by MAS will expire, and the sandbox entity must exit from the sandbox. Upon exiting, the sandbox entity can proceed to deploy the financial service under experimentation on a broader scale, provided that: 

  • Both MAS and the sandbox entity are satisfied that the sandbox has achieved its intended test outcomes 

  • The sandbox entity can fully comply with the relevant legal and regulatory requirements 

What is the overall cost?
There is no available information about the running costs of the Fintech Regulatory Sandbox. However, research by the World Bank Group and the Consultative Group to Assist the Poor (CGAP) found the regulatory sandboxes can cost over $1 million to run once human resources and salaries are factored in.
How was it implemented?

The FinTech Regulatory Sandbox in Singapore was launched in 2016 by the Monetary Authority of Singapore (MAS) as part of its broader Smart Financial Centre initiative. The MAS recognized the need to encourage and enable experimentation and innovation in the financial sector while still ensuring that consumers are protected. The Sandbox was developed to provide a balance between innovation and regulation, and to create an environment where new technologies can be tested and refined before being released to the market. The MAS has since been working to continually improve and develop the Sandbox framework to ensure that it remains relevant and effective in promoting innovation in the financial sector. 

The Monetary Authority of Singapore (MAS) has made several changes to the Sandbox framework to improve its effectiveness and relevance. In 2018, the MAS introduced the Sandbox Express, a faster option for firms with low-risk innovations to receive approval within 21 days. In 2019, the Sandbox was expanded to include non-financial services such as energy and healthcare. In 2020, the Sandbox was further enhanced with the introduction of pre-defined sandboxes for specific use cases such as insurance and digital asset exchanges.  

In 2022, the MAS launched Sandbox Plus which expanded the eligibility criteria to include early adopters of technology innovation rather than restricting it to only first movers. Furthermore, they introduced a streamlined application attached with a financial grant of up to S $500,000 (approx USD $375,000) at a 50% funding level. Finally, eligible applicants will be enrolled in the Deal Fridays program which intends to help sandbox companies access the external investor community.  

What impact has been measured?

There is evidence that the FinTech sector has expanded considerably since the introduction of the Sandbox with wider economic impact felt in terms of business creation and investment secured.  

Since 2016, Singapore has seen its number of fintech companies quintuple to over 1,400, and its fintech investments multiply 31 times to S $5.3 billion (approx USD $4 billion). The Singapore Fintech Report 2022 also shows that the fintech sector in Singapore has reached critical mass, with the blockchain and cryptocurrency segment being the largest category, followed by payments, investment/wealthtech, and regtech.  

As of September 2021, a total of 203 firms have participated in the FinTech Regulatory Sandbox in Singapore. These firms have tested a wide range of innovative financial products and services, including digital payments, blockchain-based solutions, and insurance products. 

Despite these impressive results, there are not any available studies that prove the isolated impact of FinTech Regulatory Sandbox within the context of the wider Singapore ecosystem. Consequently, we cannot accurately judge the full influence of the program.  

What lessons can be learned?

The FinTech Regulatory Sandbox in Singapore has provided several lessons that can be applied to other countries and regions seeking to promote innovation in the fintech sector.  

One key lesson is the importance of collaboration between regulators, industry players, and other stakeholders. The Sandbox has brought together a wide range of actors to collaborate on testing innovative solutions, which has helped to build trust and foster a more supportive ecosystem for fintech innovation. 

Another lesson is the importance of a flexible regulatory framework that can adapt to rapidly changing technologies and business models. The Sandbox has provided a platform for testing innovative solutions in a controlled environment, which has allowed regulators to gain a better understanding of emerging technologies and their potential impact on the financial system. 

The Sandbox has also highlighted the importance of a risk-based approach to regulation. Rather than imposing a one-size-fits-all approach to regulation, the Sandbox has allowed regulators to tailor their approach to the specific risks posed by different fintech solutions. 

CURATED BY

Sarolta Borzasi

Director for Government + Investor Engagement
Embassy of Hungary London
United States