Fintech and Sandboxes: Are They Really Useful for Innovation?

FINANCE AND BANKING / by Miguel Gallardo Guerra

Since the enactment of the Law Regulating Financial Technology Institutions, published in the Official Gazette of the Federation on March 9, 2018 (the “Fintech Law”) in Mexico, the so-called Innovative Model has been established, 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”). The 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 comply with existing regulations to operate temporarily under the supervision of the CNBV, provided they meet certain technical, legal, and risk management requirements.

Advantages:

• Enables real-world testing of innovative models without being fully subject to complex regulations.
  
• Promotes regulatory dialogue, providing legal certainty regarding new financial technologies.
  
• Accelerates the development of products and services that are in line with future regulations.
  

Challenges:

• A significant technical and legal burden, which many startups cannot handle without specialized guidance.
  
• Short-term authorization, which can hinder medium-term strategic planning.
  
• Slow implementation, resulting in a relatively small number of participants.
  

Nevertheless, the Sandbox remains 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 innovation by new companies in the country.

Let’s stay in touch!