FinTech Adoption & Regulatory Sandboxes

About the program

The FinTech Adoption & Regulatory Sandboxes program addresses a policy question that has compounded in importance over the last decade: regulatory sandboxes, which the United Kingdom's Financial Conduct Authority pioneered in 2016, have now been adopted by more than fifty jurisdictions worldwide. The empirical case for whether sandboxes deliver the outcomes their proponents promise — accelerated FinTech entry, durable consumer-protection learning, productive regulatory dialogue — has lagged the policy-adoption curve.

The institute's two FAME-funded studies in this program contribute empirical answers to two narrow but important pieces of that question. The first paper (Washington, Rehman & Lee, 2022, JRFM) examines the relationship between sandbox participation and the financial performance of UK digital banks, asking specifically whether the sandbox's measurable effects appear during sandbox tenure, after graduation, or both. The second paper (Rehman et al., 2023, Economies) extends a related FinTech-adoption framework to the manufacturing-SME credit relationship, where the policy stakes are different but the underlying analytical machinery is portable.

Both papers have accumulated meaningful downstream citation in the European banking-research and FinTech-policy literatures, including at tier-1 universities (Oxford, Imperial, KCL, Sciences Po, KU Leuven, Bologna) and in journals that influence subsequent policy discussion (Nature's Humanities and Social Sciences Communications, Wiley's Regulation & Governance, Elsevier's Digital Business). Citation reach is not the institute's primary measure of success — but it is one signal that the underlying research is contributing to a real policy conversation.

What the program does not yet have is a US-focused study. The Consumer Financial Protection Bureau's varying approaches to sandbox-style regulatory programs over the last several administrations make the US an underdeveloped empirical case. A planned third paper in this program would extend the FAME-funded analytical framework to the available US-state sandbox programs (Arizona, Utah, West Virginia have run variants) and the federal-level proposals.

Future work

The next paper in this program extends the analytical framework to the US-state sandbox programs (Arizona, Utah, West Virginia) and the federal-level proposals that have moved in and out of CFPB priority over the past several years. The methodological challenge is sample size — fewer participating firms, shorter histories — which means the US replication is best designed as a case-study-anchored quantitative analysis rather than a pure regression replication of the UK paper.

The translation work is at least as important as the next paper. Op-ed publication (American Banker, Marketplace, Bloomberg Opinion) and direct policy-officer briefings at the CFPB and OCC are the channel through which empirical findings actually reach the regulatory conversations they should inform. The institute is structuring this translation work explicitly into the FAME-funded research workflow rather than treating it as the investigator's optional outside activity.

The third extension considers FinTech adoption in markets where the formal-banking baseline is partial — sub-Saharan Africa, parts of South and Southeast Asia, parts of Central and Eastern Europe. Different policy questions, different dataset constraints, but the underlying framework on adoption-by-firm-characteristics generalizes. This work would likely be FAME-funded only in the methodology-development stage; the in-country empirical work would partner with researchers based in the relevant markets.