- Regulations can delay innovation
Fintech companies in Norway fear that we will fall behind if the Financial Supervisory Authority of Norway does not ease the regulatory requirements to develop innovative financial products and services.
“The Financial Supervisory Authority of Norway must have their hand on the steering wheel instead of their foot on the brakes,” says Liv Frehow, director of business and industry policy at ICT Norway.
“Norway may lose out on value creation, jobs and new companies if we do not have a regulatory framework that is at least as good as other countries in Europe,” says Liv Frehow, director of business and industry policy at IKT Norway.
A “regulatory sandbox” is the term used for provisions that are made so that fintech companies are able to develop new services in a controlled environment that is monitored by the Financial Supervisory Authority of Norway. The companies will, however, be exempt from any of the licensing requirements associated with heavy regulations.
Passive in Norway
“Regulations can completely discourage companies from working with innovation. There is a very real risk and threat of fintech companies moving their development projects to other countries with a better regulatory framework. It would be an inconvenience to all the parties, also to the authorities who would thus lose the ability to make provisions for regulated national product development,” says Freihow.
ICT Norway has worked on establishing a regulatory sandbox through a number of initiatives. Just before Christmas, a thorough report was submitted to the Ministry of Finance with suggested models for how a sandbox could be operated. Freihow is calling for a greater commitment on the part of the authorities.
“Compared with other countries, the Financial Supervisory Authority of Norway is passive. The United Kingdom has taken a leadership position and the authorities have taken the initiative to ease requirements to increase the rate of innovation. In Sweden and Denmark, the authorities have also accelerated making provisions for fintech companies,” says Freihow.
She understands that it is difficult for the Norwegian authorities to have the capacity and resources to manage a regulatory sandbox alone and wants dialogue to find a form of collaboration in which both private companies and other public agencies could participate. The Norwegian Data Protection Authority should be included in the process, in addition to the Financial Supervisory Authority of Norway.
A regulatory sandbox does in no way mean giving private companies free rein.
“All parties who would like to participate in the sandbox must submit an application in which they describe in detail what products or services they would like to develop. A committee must then decide which applicants make the cut. Privacy protection and compliance are of course requirements that must be integrated into the service,” says Freihow.
“The Financial Supervisory Authority of Norway must have their hand on the steering wheel instead of their foot on the brakes in this process,” says Freihow.
Facts / Regulatorisk sandkasse
- Based on input from ICT Norway, the Norwegian Parliament (Stortinget) decided in December 2016 that the Government would investigate the possibilities for creating a regulatory sandbox. Little has happened since then.
- The United Kingdom has come the furthest, and, through the initiative “Project Innovative”, it has allowed several dozen companies to experiment with innovative solutions in cooperation with the authorities.
- In Denmark, the Financial Supervisory Authority has implemented five measures to help fintech entrepreneurs. A regulatory sandbox will be established in the first half of 2018.
- In Sweden, the authorities have given positive signals that they will follow Denmark.
Standstill in Norway
The Norwegian authorities have not yet taken any initiatives to help the fintech companies. Minister of Finance Siv Jensen made reference during parliamentary question time in November 2017 to the fact that the “Financial Supervisory Authority of Norway has set up a website with information on the licensing requirements, application process and central regulations.”.
“The Financial Supervisory Authority of Norway has also appointed experts who can help guide fintech organisations in various regulatory areas. One of the goals for this point of contact is to contribute to the identification of technological development trends and to uncover any need for regulatory changes if the current regulations are not adapted well enough to new technology or new business models,” Jensen responded.