For the last two years fintechs have enjoyed total total investments growing at record highs, and have also been in a rush to launch new products to stay ahead in their respective markets. While launching a new product can be exciting, it also comes with its fair share of challenges. Fintech CEOs and executives often find themselves struggling with various issues that can block them from reaching their goals and milestones. In this blog post, we will explore five common pain points faced by fintech companies when launching a new product, and how a regulatory sandbox can help.
Pain Point #1: Compliance Challenges
Fintech companies must adhere to a complex set of regulations, and compliance can be a daunting process to undertake. Regulatory risk is the biggest threat to Fintechs. A regulatory sandbox can help by providing a controlled environment to test new products and services under the guidance of regulators. This can help fintech companies gain a better understanding of regulatory requirements and ensure that their products are compliant.
Moreover, a Sandbox can help Fintechs get faster regulatory reviews and be compliant to go to market even when there are gaps in established regulation, or current regulations don’t address the product to be launched. It also during these instances that compliance challenges can transformed into competitive advantage with the help of regulatory sandboxes.
Pain Point #2: Lack of Customer Trust
One of the most significant challenges facing fintech companies is building customer trust. Customers are often wary of new and untested financial products and services. A regulatory sandbox can help by providing a platform for fintech companies to build trust with customers by demonstrating the safety and security of their products.
Going through a regulatory sandbox to bring your product to market tells your customers that you’ve gone through a level of regulatory due diligence prior to launching and that you are being supervised. This can bring your customers some level of comfort to use your product even if you are not fully licensed yet.
Pain Point #3: Limited Resources
Launching a new product requires significant resources, including funding, personnel, and time. A regulatory sandbox can help by reducing the cost and time required for regulatory compliance. By providing a controlled environment for testing, fintech companies can avoid costly mistakes and streamline their product development process.
A sandbox is ideal for startups and Fintechs who don’t have a lot of funding to hire big compliance and legal teams that are often required to apply and be awarded licenses. The sandbox process can begin while they’re small, and allow them to also grow, raise funds and hire resources to meet full licensing requirements.
Pain Point #4: Uncertainty Around Business Models
Fintech companies often face uncertainty around their business models and revenue streams. A regulatory sandbox can help by providing a platform to test new business models and revenue streams in a controlled environment. This can help fintech companies identify new opportunities for growth and revenue generation.
Many fintechs businesses start with a model then have to pivot or expand the scope of their original focus. A regulatory sandbox can be useful in getting the proper regulatory approval faster if the product needs to evolve or expand to offer order services that might or might not be regulated.
Pain Point #5: Competition
The fintech industry is highly competitive, and launching a new product can be challenging in a crowded market. A regulatory sandbox can help by providing a level playing field for fintech companies to test their products and services. This can help foster innovation and ensure that the best products and services rise to the top. Going through a sandbox also allows fintechs to turn compliance into a competitive advantage to win partners and customers.
To sum up, launching a new product in the fintech industry can be a challenging process. However, a regulatory sandbox can provide significant benefits for fintech CEOs and executives companies looking to overcome these pain points. By providing a controlled environment for testing, allowing supervised go to market even when there is lack of regulation, a regulatory sandbox can help fintech companies ensure compliance even in early days, build customer trust, streamline their product development process do more with less resources, pivot or expand to new business models, and leverage compliance to stay competitive , identify new revenue streams, and foster innovation. As the fintech industry continues to evolve, regulatory sandboxes are likely to become an essential tool for regulators to adopt to supervise Fintechs and their related risks. Fintech companies looking to stay ahead of the curve should embrace this new tool and make it work for them.
With EMTECH’s Digital Regulatory Sandbox™ fintechs and FSPs are able to take advantage of the benefits stated above. In addition, we’ve built regularly reporting APIs and near real-time data visualization dashboards that are instantly available for testing products at no cost . Once you sign up at app.emtech.com you can check sandbox requirements, test the APIs before you submit an application, manage reporting and stay in compliance while in market.
Our team stands ready for guidance, questions and support throughout your Digital Regulatory Sandbox™ experience. Simply book a call here to schedule a meeting with us!