At the end of last year, Florida’s Office of Financial Regulation announced it would launch a Financial Technology Sandbox, aimed at allowing fintech startups and innovators to test new products and services without fear of breaking laws that have not yet caught up with innovation. Outdated regulations can serve as barriers to entry for some startups, as they rely on trial and error to see what is illegal and what is not. Emerging companies do not always have the funds to keep lawyers on hand letting them know what is and is not possible.
Other fintech sandboxes, such as the one launched in the U.K. in 2015, have proved successful for companies trying to enter the space, especially those outnumbered ¬¬and out-funded by incumbents. The purpose of Florida’s fintech sandbox is to spur innovation in the fintech sector, and to make Florida a more competitive state for high-paying tech jobs.
Why is it called a sandbox?
When children play in sandboxes, they are developing their social skills, feeling out the other children, and understanding what they can get away with. Parents are nearby watching to make sure things do not get out of hand, but otherwise, they try to let the children feel the situation out on their own. Florida’s fintech sandbox operates under the same premise, allowing companies to experiment with new products and services without having regulators breathing down their necks, but instead watching from afar to see how things go. According to a press release from the Florida CFO’s office, “A ‘regulatory sandbox’ strikes the balance of ensuring a stable market that protects consumers while creating an environment where companies are provided flexibility to operate and provide new types of products and services.”
How do you sign up?
Each company must apply for an FTS license. There are application and location filing fees. Applicants must submit fingerprints for a background check and answer disclosure questions. There are net worth requirements depending on whether your company is applying for a Money Services Business Product or Service license ($375), or a Consumer Finance Product or Service license ($625). See requirements here.
What are the benefits?
Innovation sandbox programs are great for states trying to be realistic about innovation regulation. They allow for new companies to understand the regulatory framework they are working within, and help regulators understand the specifics of innovative technologies. Without the fear of huge fines for breaking laws they did not know existed or applied to them, startups can innovate more freely, and build out their technologies in a more open environment with regulators. Regulators can subsequently write realistic legislation to protect consumers and create a healthy environment for businesses to thrive.
At Omni Public, we represent fintech companies that are very excited about what Florida’s regulatory sandbox means for the future of innovation in the state. If your fintech company needs guidance on navigating the sandbox application process, feel free to reach out to us at ss@omnipublic.global.
