The first batch of projects in Beijing's "Regulatory Sandbox" have been finalized, and the products involve blockchain and other technology applications

Reporter: Meng Fanxia and Liu Sihong

Source: Beijing Business Daily

Editor’s note: The original title was “Follow-up to the finalization of the first batch of projects in the “regulatory sandbox”: relevant details are being drafted”

After two months of soliciting opinions, the first list of applications entering Beijing's financial technology "regulatory sandbox" was officially released. On March 16, the Business Management Department of the Central Bank issued an announcement stating that after public review, the first batch of six innovative applications in Beijing's financial technology innovation supervision pilot have completed registration and will officially provide services to users. Beijing Business Daily reporters exclusively learned that at present, the supervision is optimizing the risk prevention mechanism of the "regulatory sandbox" based on the pilot situation, and will issue relevant regulatory details in due course. For "boxed" institutions, their innovative applications are also expected to be "out of the box" after being polished and mature, but they must be operated by licensed institutions.

The first batch of 6 applications were finalized

Beijing Business Daily reporter noticed that the first batch of innovative applications to be piloted in Beijing's financial technology "regulatory sandbox" was announced on January 14, and public opinions were solicited. Judging from the latest selection, all six innovative applications to be piloted have been shortlisted. The Central Bank's Business Management Department disclosed that the first batch of officially selected applications include IoT-based item traceability certification management and supply chain finance, Weijie loan products, CITIC Bank (Hong Kong Stock 00998) Zhiling products, AIBank Inside products, fast review and fast loan products, and mobile POS innovative applications; the corresponding pilot units are Industrial and Commercial Bank of China (Hong Kong Stock 01398), Agricultural Bank of China (Hong Kong Stock 01288), CITIC Bank/China UnionPay/Du Xiaoman/Ctrip, Baixin Bank, Ningbo Bank, China UnionPay/Xiaomi Digital Technology/JD Digital Technology.

From the perspective of participating entities, the first batch of pilot project participants are mainly licensed institutions, and there are also financial technology companies "entering the box"; from the perspective of "entering the box" projects, the first batch of selected application products are of many forms, involving the application of technologies such as the Internet of Things, artificial intelligence, big data, blockchain, API, etc. in the financial field.

"The fact that all six applications were shortlisted shows that the public highly recognizes the fintech 'regulatory sandbox' mechanism. In the future, this normalized mechanism can be used to balance multiple relationships, such as development and innovation, financial institutions and fintech companies, companies and supervision, and innovation and compliance." Che Ning, secretary-general of the Beijing Cyber ​​Law Society, said in an interview with a Beijing Business Daily reporter that the six shortlisted applications also once again sent a signal, proving that valuable application innovations are in the fields of supply chain finance, open banking, Internet credit, and mobile payments. It is also a positive guidance and publicity for the entire industry.

Li Xin, a researcher at the China Minsheng Bank (Hong Kong Stock 01988) Research Institute, also said that this "in-box" project fully reflects the cutting-edge direction of industry development and responds to the actual needs of financial consumers. It has the characteristics of advanced technology, universal scenarios, and strong demonstration.

Innovation and stability game

Regarding the latest preparation progress and launch time of the six applications, Beijing Business Daily reporters interviewed several participating institutions and learned that some applications have already launched services to users, such as the Agricultural Bank of China's Micro Express Loan product, which was launched in September 2018. However, some innovative projects are still in the process of functional iteration optimization and testing, and are scheduled to be officially "launched" in late March or April. At the same time, some institutions also said that the specific launch time of their innovative applications will need to wait for regulatory notification. According to people familiar with the matter, according to the requirements of the "regulatory sandbox" project team, after the project is "entered into the box", it is necessary to establish a complete project monitoring and management system according to the requirements of the project team before it is officially launched, and it can only be launched after regulatory approval.

"Some projects have been in operation before, but they can still be 'boxed' as innovative projects. The reason lies in the regulatory balance between innovation and stability. The 'boxed' projects must not only be highly innovative, but also need to consider the needs and recognition of product users, or the maturity of the product itself and other factors." Che Ning told the Beijing Business Daily reporter that in addition to evaluating and measuring the products themselves, the regulatory innovation pilot will also largely consider how to adapt this set of regulatory mechanisms. Therefore, if a large number of innovative and controversial products are allowed in at an early stage, it will not be conducive to the long-term development of the "regulatory sandbox" mechanism.

Regulatory details will be issued in due course

For the Chinese version of the "regulatory sandbox", project "entry" is only the first step. After the service is launched, how to track, monitor, manage and evaluate the application has also attracted great attention in the industry. Beijing Business Daily reporters have exclusively learned that after the official launch, the application will enter the trial operation stage. Institutions need to report project progress, current problems and handling results regularly every month according to the corresponding indicators of the project monitoring and management system, and continuously improve and optimize the project according to project requirements, so as to ensure the stable and orderly operation of the "entry" project.

At the same time, the "regulatory sandbox" also emphasizes risk prevention and risk compensation mechanisms, requiring "boxed" companies to interact closely with regulators and use special funds for technological innovation, innovation deposits or business emergency compensation to ensure that innovation risks are controllable. At present, regulators are optimizing the risk prevention mechanism of the regulatory sandbox and may issue relevant detailed rules in due course based on the pilot situation.

"After 'entering the box', regulators will select a certain range of customers and regions for trials, and monitor the results of the trials, observing from the perspectives of privacy protection, risk prevention, and the convenience of loan applications to see whether financial risks will be caused, as well as the risk of personal privacy leakage. In terms of management, regulators will conduct full-process and digital supervision, and use digital tools to conduct data analysis of products before, during, and after the event, and will pay special attention to personal privacy protection and financial risk control." Sun Yang, director of the Financial Technology Center of Suning Financial Research Institute, told the Beijing Business Daily reporter.

A senior person who wishes to remain anonymous said that compared with the "regulatory sandbox" proposed by the UK and other countries, a major feature of the current Chinese version of the "regulatory sandbox" is that it does not set a testing period. Foreign "regulatory sandboxes" mainly focus on projects, set a testing period for the projects, and then make an evaluation. If they comply, they will pass, and if there are problems, they will be removed from the box; while the main purpose of my country's regulatory innovation pilot is to form a set of mature, standardized and highly feasible regulatory rules around products and their fields.

For the institutions that are "in the box" this time, their innovative applications are also expected to be polished and mature in the box before being "out of the box", but the "out of the box" must be operated by licensed institutions. In Li Xin's view, for the domestic "regulatory sandbox" that is still in the pilot stage, there may be two points that need urgent attention in the future. The first is to pay attention to strengthening communication with enterprises, the public, etc. during the promotion of supervision. In the practice of the "regulatory sandbox", we must always pay attention to reflection and innovation on the supervision itself; in addition, the purpose of the Beijing Fintech "Regulatory Sandbox" pilot is not only to better promote financial technology innovation and implementation, but also to explore the most feasible regulatory ideas and tools for financial technology, and replicate and promote its experience to other parts of the country.