If properly regulated, technology-enabled financial services such as mobile payments, peer-to-peer (P2P) lending, alternative credit scoring, and new forms of savings and insurance, can accelerate the rise in financial inclusion for the 1.7 billion people worldwide who do not have a bank account.

This is according to a new report commissioned by Her Majesty Queen Màxima of the Netherlands, the United Nations Secretary-General’s Special Advocate for Inclusive Finance for Development (UNSGSA).

The report, titled Early Lessons on Regulatory Innovations to Enable Inclusive Fintech: Innovation Offices, Regulatory Sandboxes, and Regtech, was produced by the University of Cambridge’s Centre for Alternative Finance (CCAF) and the Fintech Working Group of the UNSGSA with support from the Monetary Authority of Singapore (MAS).

Released earlier this month, the document highlights the various innovative regulatory initiatives that have been undertaken by regulators around the world to accelerate fintech development and improve financial inclusion, including innovation offices, regulatory sandboxes, and regtech solutions for regulators.

Innovation offices as an Entry Point

The report described innovation offices as the first step in the regulator innovation journey. These improve understanding of tech-enabled financial innovation and support appropriate regulatory responses.

Examples of innovation offices around the world include Australia’s ASIC Innovation Hub, Bahrain’s Fintech Unit, Dubai’s Fintech Hive, and Singapore’s Global Fintech Hackcelerator.

Regulatory sandboxes

Regulatory sandboxes have been widely adopted as an innovative regulatory initiative. These are formal programs that test financial services and business models with actual customers, subject to certain safeguards and oversight. Sandboxes help regulators gain a better understanding of fintech and develop evidence-based regulations that promote inclusive fintech.

But regulatory sandboxes are neither necessary nor sufficient to promote financial inclusion, the report says. They offer benefits but are complex to set up and costly to run. Experience shows that similar results can be more affordably achieved through innovation offices and other tools.

Regulatory sandboxes that have been launched around the world include Singapore’s Fintech Regulatory Sandbox, Malta’s Cryptocurency Sandbox, Malaysia’s Financial Technology Regulatory Sandbox, Abu Dhabi’s Fintech RegLab, and Japan’s Fintech Proof of Concept Hub.

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