Marie Skłodowska-Curie grant recipient dr. Alfredo Hernández Sanchez’s research on the understanding of FinTech Regulatory Sandbox Development in Europe (FIRSA).
Great news reached VU IIRSP earlier this year. A project on the development of FinTech regulatory systems in Europe was awarded EU funding. The research for this project will be done by a Central European University political scientist dr. Alfredo Hernández Sánchez (Academic advisor Assoc. Prof. Dr. Vytautas Kuokštis). Project is funded by European Union science research and innovation program “Horizon Europe” Marie Skłodowska-Curie Actions Postdoctoral Fellowships – MSCA PF.
The growth and spread of FinTech has created complex challenges that have placed a significant burden on current regulatory frameworks. In response to the need to balance the promotion of innovation with the maintenance of financial stability and the protection of consumers, one institutional innovation – the FinTech regulatory sandbox (FRSB) – has gained traction to meet these challenges. However, the trajectories of adoption and the level of development of FRSBS vary significantly among EU countries in ways that remain underexplored. The FIRSA project aims to fill this gap by offering a multidimensional measurement framework of FRSBS in the EU to develop a greater understanding of their differences, relative strengths and weaknesses, and the mechanisms that lead to their implementation.
“We are very grateful for the grant that we received, for us it is, first, an acknowledgement of our project’s importance. The subject matter – FinTech political economy and regulatory innovation framework is important and so far, insufficiently researched. We hope that this research project will help uncover differences in the application of these platforms in different countries, but also grant scientific and practical insights into this topic”, – Academic advisor Assoc. Prof. Dr. Vytautas Kuokštis says.
We talked with dr. Hernández Sánchez about his project “FIRSA”, first results, challenges and the motivation behind the research topic.
What is the project about?
The research part aims to understand regulatory sandboxes in fintech, specifically in the EU. These regulatory sandboxes are a regulatory innovation in which firms want to test out new financial services that involve the use of new technologies such as AI or big data. Now, the reason behind the regulatory sandbox, or at least this is the stated goal, is to regulate these technologies without stifling innovation. So, the goal is for financial systems to become more efficient and more innovative without endangering the privacy of individuals or creating financial risks in the system.
The goal of the project is to learn, first, what are the differences in approaches with sandboxes in Europe, why do some countries implement them, and others don’t. Within the group that implements these sandboxes we aim to find how they are being organized and why are they being organized. This is stage one. The second part is getting a sense of what policy lessons we can learn from the experience of implementation of the sandboxes so far. Which are working better than others, are they being applied in uniform ways and what are the markers of success.
What made you choose this research topic?
Inspiration came from VU IIRPSs Assoc. dr. Vytautas Kuokštis research about FinTech political economy. Before this I was doing corruption studies, trying to measure corruption across different sectors. This project allowed me to come back to financial systems analysis, which I always enjoyed doing.
What are the first results of this research?
At the moment, we are working on a paper on why countries over all decide to develop FinTech sandboxes. What are the things that predict whether a country will develop the sandbox. We have been finding that the greatest prediction of this possibility is the level of e-government services. Now this tells us that if the governments are more concerned with innovation or something that falls more in the realm of innovation, they are more likely to develop a regulatory system rather than the ones interested in financial stability. It is also likely that countries with regulatory sandboxes are more motivated by innovation in the public sector rather than specific financial goals.
How do you think your research will impact science and practical applications?
I think the benefits are twofold. On the one hand, it will give science more insight into how these regulatory platforms work in different countries, which practices are working, and which are perhaps not working as expected. Today, we do not yet have enough data on how they work – whether they are just theoretical solutions or whether they help companies to experiment and innovate. This study will help us to understand the logic behind these platforms in a more systematic way.
On the other hand, in practice, these insights can be of great value to policy makers, who could use the results of the study to improve existing regulatory platforms or to develop new ones. This is relevant not only for the financial sector, but also for broader mechanisms to stimulate innovation, to ensure a balance between regulatory requirements and the space for creative ideas.
What advice would you give to young researchers interested in applying for a grant?
In my case, VU TSPMI provided a lot of support in the preparation of my application, which was one of the main reasons for my success. The grant not only funds the project, but also gives me the opportunity to establish meaningful partnerships and develop my research. I think my main advice to other young researchers would be to establish a strong working relationship with the institution you want to work for. When the project is strong and the team is professional, the chances of success increase.
The interview is part of a project that has received funding from the European Union under the WIDERA programme (FIRSA project, Grant Agreement No. 101180601). Views and opinions expressed are however those of the author(s) only and do not necessarily reflect those of the European Union or the European Research Executive Agency. Neither the European Union nor the granting authority can be held responsible for them.
