Increasingly the focus on innovation for financial inclusion is moving towards regulatory sandbox or a reg-lab that allows for small scale, live testing of new ideas and tools by private entities. This enables evaluation in a controlled environment and under the regulator’s supervision. The Watal Committee for Digital Payments had recommended this to the Reserve Bank of India in December 2016, as did the Ramadorai Committee on Household Finance in July 2017. In “Regulatory Sandboxes and Financial Inclusion” Ivo Jenik and Kate Lauer of CGAP explain the entire concept and give a round-up of the various innovations being tested across the world.
However, while the idea behind a sandbox is to give regulators and private firms a chance to test innovative ideas and tools, this can hardly supplant the real role of the regulator in providing a healthy environment for innovation. India has not only a lot of work to do in setting up an enabling legal framework and assisting fintech start-ups, there is a huge gap in access to basic digital and financial infrastructure itself. If fintech is to innovate for the financially excluded, RBI must work with DoT and TRAI to ensure and monitor digital connectivity at the village level; it has to put in place standards for interoperability across agents and platforms, and it must enable fair access to all players through open data, channels, and APIs. Read more on the global evidence for Going Beyond Regulatory Sandboxes to Enable Fintech Innovation in Emerging Markets (Simone di Castri and Ariadne Plaitakis, CGAP)
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