Fintech and Sandbox: Is It Truly Useful for Innovation?

FINANCE AND BANKING / by Miguel Gallardo Guerra

Since the enactment of the Law to Regulate Financial Technology Institutions, published in the Federal Official Gazette on March 9, 2018 (the “Fintech Law”) in Mexico, the so-called Innovative Model, through which financial services may be provided using technological tools or means, under modalities different from those existing in the Mexican market at the time the temporary authorization is granted pursuant to the Fintech Law (also known as the “Sandbox”). Sandbox has been presented as a tool to foster financial innovation within a controlled supervisory environment. However, how useful has it really been for the fintech ecosystem?

The Sandbox’s goal is clear: to allow innovative business models that do not yet fully fit within existing regulations to operate temporarily under CNBV supervision, provided they meet certain technical, legal, and risk management requirements.

Advantages:

• Enables real-world testing of innovative models without full exposure to complex regulation.
  
• Fosters regulatory dialogue, providing legal certainty around new financial technologies.
  
• Accelerates development of products and services aligned with future regulation.
  

Challenges:

• High technical and legal burden, which many startups cannot meet without specialized guidance.
  
• Short-term authorization, which can limit medium-term strategic planning.
  
• Slow practical implementation, resulting in a relatively low number of participants.
  

Nevertheless, Sandbox remains as a valuable tool. Rather than an immediate solution, it should be viewed as a transitional stage toward more flexible regulation, built upon supervised experience and mutual learning between innovators and regulators. It will be important for the Mexican authorities to update the Fintech Law and secondary regulations to allow for the gradual and flexible development of innovative models in Mexico, implementing a framework of proportional and progressive regulatory requirements tailored to the size and characteristics of each model, thereby encouraging the innovation of new companies in the country.

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