Until a dozen or so years ago, the manufacturers of autonomous cars assured us that a new era is coming - the era in of drivers becoming redundant and cars knowing where we want to go. Then taking us there themselves.
Some even said that such cars will know where to go sooner than us.
This never happened. At least not everywhere.
Because there is a town where there are more autonomous cars than anywhere else. It is called "The Villages".
750 miles of roads. 125,000 citizens. Average citizen's age - approximately 70 years old. Sounds like a retirement town? And rightly so, because this is the city of retirees.
On the area of 32 square miles, the largest retirement town in the USA was created. In which all drivers drive like a grandma.
And do you know what else drives like a grandma? Autonomous cars, at the present stage of development.
It was "The Villages" that was chosen by Ford and Chrysler as their self-driving car testing ground. Quiet neighborhood, no complicated intersections, limited traffic, low speed limits and predictable weather.
And thousands of people who are never in a hurry and who'd love to get a ride to a golf course or to church.
That's a perfect example of a sandbox. A separated environment with strictly controlled rules, where you can learn safely. Who can take advantage of it? Obviously Ford and Chrysler, because they want to know what can surprise their autonomous cars. But is it just them?
Places such as The Village also provide invaluable knowledge to legislators, who will sooner or later be forced to formulate laws and regulations that will allow the safe use of autonomous cars in the real world.
But what does that have to do with banking?
The key are the two words "security and safety". In case of autonomous cars, the year 2018 was a milestone - when a pedestrian died in a collision with an Uber self-driving car. This led many companies - led by Uber - to take a step back and give up testing in normal traffic for a while.
All right, but you can't hit a man with banking, one might say.
Well actually you can... in a way. There is no doubt that banking and finance have a huge impact on people's lives and the activities of companies or even countries. Banking is a particularly strictly regulated area of business. Why? Because banking must be, firstly, stable and, secondly, resistant to attempts to use the system in an unforeseen way (using legal methods or not). A system with holes is a real loss of real money.
(You may read more on this in Chris Skinner's article)
But banking must also be innovative. Innovation in the financial sector - just like autonomous cars - need to be tested and tamed before it can be implemented. Strict regulations must be established to protect not only consumers and shareholders but also the rest of the market from chaos. Remember what was the cause of the big blackout in 2003 in North America? A small bush fire under the transmission line? No, it was the lack of control and fuzzy regulations concerning emergency situations.
Therefore, the priority objective of sandboxes is to establish or refine legal regulations to the rapid growth of fintechs in a way that will enable them to function smoothly on the market, but only in a way that is safe for customers.
By the way, sandboxes are also fintechs' great opportunities to attract attention of various entities potentially interested in their development.
In 2015, in the UK, the Financial Conduct Authority (FCA) launched the first regulatory sandbox for fintechs, which goals were:
- the ability to test products and services in a controlled environment
- reduced time-to-market at potentially lower cost
- support in identifying appropriate consumer protection safeguards to build into new products and services
- better access to finance
In Asia, the pioneer regulatory sandbox was Monetary Authority of Singapore (MAS). You could read that
"The regulatory sandbox will enable FIs as well as Fintech players to experiment with innovative financial products or services in the production environment but within a well-defined space and duration. It shall also include appropriate safeguards to contain the consequences of failure and maintain the overall safety and soundness of the financial system.”
The leaders of Europe are the Netherlands, Denmark and of course, the United Kingdom mentioned earlier.
This year, a project coordinated by the Ministry of Finance and co-financed by the European Union has also been launched in Poland. We are looking forward to launching the regulatory sandbox on the Polish market.