The Global Financial Innovation Network (GFIN), a network of 29 state financial sector regulators and supervisors committed to supporting financial innovation in the interests of consumers, including Quebec’s Autorité des Marchés Financiers (AMF) and the Ontario Securities Commission, has announced the launch of a pilot phase of cross-border testing and knowledge sharing initiative for Fintech firms.
The Pilot Phase
The GFIN’s cross-border testing and knowledge sharing initiative aim at creating an environment that allows Fintech firms to simultaneously trial and scale new technologies in multiple jurisdictions, gaining real-time insight into how a product or service might operate in the market. In order to support the development of this initiative, a pilot cohort of volunteer Fintech firms will be assembled. While the participating regulators will collaborate and share their experiences, the firms wishing to participate will need to independently meet the eligibility criteria set by the regulator of each of the jurisdictions in which they apply.
Pilot tests are expected to run from Q2 2019 for a six-month period. The GFIN hopes that over time, such trials could inform regulatory authorities about potential areas of regulatory convergence.
A Brief History of the GFIN
The idea of creating a “global sandbox” for emerging innovation trends within financial services, including big data, artificial intelligence, and blockchain-based solutions, to be tested and to compete in a global regulated space originates from a proposition document published by the United Kingdom’s Financial Conduct Authority (FCA) in February 2018.
At this point in time, some regulators have already put in place sandbox initiatives such as the AMF’s Fintech Lab and the Australian Securities and Investments Commissions’ Testing FinTech products and services without holding an AFS or credit licence exemption (RG 257). The FCA felt that a global inclusive community of financial services regulators could benefit from sharing such experiences.
The project later evolved and broadened in scope and the concept of a sandbox became only one of the components of the group’s functions. The discussions that followed the FCA’s initial publication culminated in the release of a consultation paper in August 2018. The 99 responses to this consultation, which were overwhelmingly positive in favour of establishing the GFIN, paved the way for the GFIN’s official launch in January 2019.
Concurrently with its launch, the GFIN has also published its terms of reference for governance and membership and unveiled the three primary functions that emerged from the consultation:
- To act as a network of regulators to collaborate and share experiences of innovation in respective markets, including emerging technologies and business models, and to provide accessible regulatory contact information for firms.
- To provide a forum for joint regulatory technology work and collaborative knowledge sharing/lessons learned.
- To provide firms with an environment in which to trial cross-border solutions.
The GFIN is also discussing further development of its core functions and next steps for the network.
Given the implication of major regulators and other notable worldwide organizations such as the International Monetary Fund and the World Bank Group, traditional financial institutions and Fintech firms alike should pay close attention to the work of the GFIN as it may influence the regulatory landscape of the financial sector in the coming years. This is even truer for Canadian firms since four of the 29 participating regulators are Canadian, with the AMF being part of the GFIN’s coordination group.
Thanks to Patrick Dupont, articling student, for his contribution to this article.