Greece’s central bank has launched a regulatory sandbox as it looks to encourage fintech initiatives.
Sandboxes allow fintech start-ups and other innovative initiatives to conduct ‘live’ experiments under regulatory supervision. They are becoming increasingly popular worldwide as financial authorities look to encourage start-ups and competition.
Greece’s sandbox has been funded by the European Union (EU) via its Directorate-General for Structural Reform Support (DG Reform) and implemented in collaboration with the London-headquartered European Bank for Reconstruction and Development (EBRD).
The sandbox is – for now – for use only by entities and services already authorised by the Bank of Greece. But the aim is to expand its scope to enable also non-authorised financial firms to test their innovative solutions. It could also be expanded to institutions headquartered in other EU member states and operating branches in Greece ‘in co-operation with the supervisory authority of the home member state’.
Sandbox typically operate by welcoming cohorts of successful applicants at pre-set intervals – for example, every six months. Greece’s sandbox, however, will be open to prospective applicants ‘on an ongoing basis’, according to an eight-page ‘FAQs’ document (available in English). The Bank of Greece says it may ‘at its discretion and after giving due notice, open a thematic cohort to focus on specific solutions and challenges that are of interest to the Greek financial services market.’
Building on Fintech Innovation Hub
The sandbox was launched at an event including representatives from the Bank of Greece, EU institutions and others.
The central bank’s governor, Yannis Stournaras, said in a speech that the sandbox “would not have been possible” without the EU’s financing, support from the European Commission and EBRD’s technical assistance.
The Bank of Greece has operated a Fintech Innovation Hub since March 2019. Stournaras said the sandbox would serve as “a further driver of fintech and innovation in Greece, in addition to the Innovation Hub” and that “the Bank of Greece attaches great importance to innovation, all the more so as it expects that the end of the pandemic will shape a new social and economic reality, primarily digital, in which knowledge, scientific research, technology and innovation will be the main drivers of prosperity”.
Outlining the Bank of Greece’s digital agenda, Stournaras referenced the central bank executive committee’s adoption last year of an act on the terms and conditions for remote electronic identification of natural persons as part of a digital on-boarding process; and the importance of TARGET Instant Payment Settlement (TIPS), a market infrastructure service launched in 2018 by the Eurosystem – the European Central Bank and the central banks of the 19 EU member states that use the euro.
“The financial system, incumbents and start-ups alike, is undergoing digital transformation at an increasingly faster pace,” said Stournaras. “The pandemic has further accelerated this process, particularly in such areas as e-commerce, contactless transactions through cards or e-wallets and electronic money transfers in general – instant versions of which will soon become possible in Greece as well, once we join TIPS, the Eurosystem’s TARGET Instant Payment Settlement market infrastructure service.”
EBRD: ‘accelerating digital transition among priorities’
Examples of well-established fintech sandboxes include those operated by the UK Financial Conduct Authority (FCA) and Monetary Authority of Singapore (MAS).
EBRD director and regional head for Greece and Cyprus Andreea Moraru said the creation of the sandbox “places Greece among the pioneer countries in the EU that have ventured into regulatory sandboxes in order to foster innovation in financial services”.
“For the EBRD, accelerating digital transition is among our top priorities, and we see the Greek sandbox as an important step forward for the benefit of consumers, society and the Greek economy overall,” she added.
In remarks given at the launch event via videolink, DG Reform’s director-general Mario Nava said: “We all know that the oldest rule of finance is ‘no risk, no return’. And I think here [in creating the sandbox] you have shown leadership [and] ability to take risks for the benefit of return.”
The event also included a discussion entitled ‘Κey Learnings and Insights on Regulatory Sandboxes as Innovation Facilitators’ featuring a panel including Jan Ceyssens, head of the digital finance unit in the European Commission’s DG for Financial Stability, Financial Services and Capital Markets Union (DG Fisma).
‘Indicative’ list of technologies
The Bank of Greece has set out what it describes as an ‘indicative and non-exhaustive’ list of technologies and solutions that may be used by prospective sandbox applicants within their propositions. These include: application programming interfaces (APIs); artificial intelligence (AI) and machine learning; biometrics, digital ID and tokenisation; cloud computing; blockchain and distributed ledger technology (DLT); and natural language processing (NLP).
A spokesperson for the Hellenic Bank Association, an Athens-based representative body for Greek and foreign banks operating in the country, told Global Government Fintech that it “fully supports” the sandbox’s creation “as another useful tool to foster innovation in financial services”.
The Bank for International Settlements (BIS) published a working-paper last year exploring the extent to which gaining admission to a sandbox boosts fintechs’ access to finance.
Entitled ‘Inside the regulatory sandbox: effects on fintech funding’, the 42-page paper looked at the experience of the FCA sandbox in the UK. After a data analysis (2014-2019) the authors found that firms entering the sandbox saw an increase of 15 per cent in capital raised post-entry relative to firms that did not enter; and their probability of raising capital increases by 50 per cent. The paper’s authors concluded that their findings can be seen as an encouragement for policymakers to scale up experimentation in sandboxes.
EY acted as consultants on the Greek sandbox’s creation and will continue to work on its implementation until February 2022.
WATCH ‘Bank of Greece regulatory sandbox event’ highlights (5 min 38 secs; some contributions are in Greek language and some in English)
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‘Brazil ready to launch fintech sandbox’: our news story (9 Nov 2020) on the Banco Central do Brasil and the South American country’s National Monetary Council having announced the guidelines for a Brazilian sandbox
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