BBVA, one of the largest and most important banks in the world, has issued a statement regarding the recently and definitively approved regulatory sandbox in Spain for the digital transformation of the country's financial system.
In a release In a recently issued statement, BBVA stated that the approval and implementation of a regulatory sandbox, or controlled testing space, will greatly facilitate the experimentation and implementation of financial technology projects, which will promote digital transformation and optimize the current financial system. The bank highlights that, with the approval of this new bill, Spain remains at the forefront of countries that have “fintech” testing environments, allowing the control and supervision of activities related to the technological and financial sector.
“Financial technology services have taken an important step in Spain with the recent approval of a project to create a testing sandbox to monitor their activity.”
BBVA recognizes the need to create a new regulatory framework, or adapt the existing framework, to meet the changing needs of society. Today, technology and digitalization have taken over many spaces and sectors of society, including the financial and banking sector, which now enjoys various types of digital applications, electronic systems, biometrics, and more, to facilitate its operations and functioning, and the provision of services to its customers and users.
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Benefits of digital transformation
Firstly, BBVA points out that the digital transformation of the Spanish financial system opens the doors to a large number of new participants and financial service providers, which have the potential to provide greater competitiveness and reach to the current system. The digital transformation allows the incorporation of new companies, startups, fintechs and large technology companies, capable of improving the current financial landscape, thanks to the integration of a regulatory framework that encourages the development of the industry in a controlled and secure manner.
A regulated sandbox environment allows technology companies and financial and banking services companies to innovate in new technological developments applied to the field of finance, always under the supervision of the financial regulator. Through a regulatory sandbox, as these test environments are known, companies will be able to implement innovations in compliance with existing regulations and applying standards for the protection of consumers and investors, while clarifying and defining the regulatory framework applicable to these sectors.
Adaptation and changes
Technology offers many great advantages, especially in the current times, where the COVID-19 crisis and pandemic have forced the world's society to adopt safety and health measures in order to protect its health. Restricting physical contact is one of the biggest security measures implemented today, which is promoting and driving, much more quickly, the adoption of digital systems for making payments, exchanging assets and other procedures.
In addition to facilitating the execution of operations and transactions, digitalization also allows companies and banking and financial institutions to optimize the provision of services. For example, thanks to technology, users have access to services 24 hours a day, 7 days a week, without being limited to working hours. Likewise, technology also streamlines processes, making the services offered by different entities faster and more effective, helping users and clients save time and money.
On the other hand, other great advantages offered by technology and the digitalisation of services are related to security and control of personal finances, two fundamental aspects for the development of today's society.
Lucia Pacheco, member of the BBVA Regulation team, highlighted that the regulatory sandbox included in the Law on Digital Transformation of the Spanish Financial System will “accelerate the learning process of regulators and supervisors”, which in turn will facilitate the adaptation of the country's regulatory framework to the new digital era.
Competitive environment
As we can see, digitalization is a fundamental aspect for the functioning of the current financial system, so the integration of a regulated test environment will allow continued technological development to improve the efficiency, operability and competitiveness of companies, entities and businesses in the country. BBVA highlights that the approval of the bill by the Economic Affairs and Digital Transformation Committee of the Spanish Senate allows the law for the Digital Transformation of the country's financial sector to be given a definitive form, accelerating innovation and the adoption of new technologies within financial services.
“The goal of these spaces, known in the financial world as 'sandboxes', is to serve to balance compliance with regulations and protect consumers, without putting barriers in the pace of innovation of companies.”
The report of Statista, a data and statistics provider, shows data which reveal that investment in companies specialising in the development of financial technology has increased significantly in Spain over the last 10 years, going from 9.000 billion in 2010 to more than 137.000 billion dollars in investment and development at the end of 2019.
Benefits of the regulatory sandbox in Spain
BBVA also pointed out several advantages and benefits of having a regulatory sandbox, as is the case in other countries and regions of the world, such as the United Kingdom, Hong Kong and South America. The entity states that this is one of the key tools for financial authorities to safely enter the new digital environment, accelerating their learning process, positioning the country as a center of innovation and attracting new talent to the system at a national and international level.
Similarly, BBVA states that there are also great benefits for users and consumers. For example, safe experimentation guarantees protection for users and consumers and their investments, as well as guaranteeing greater accessibility to a wide range of innovative products and services.
Finally, the entity points out that the regulatory sandbox will allow companies, businesses and entities in Spain to experiment with projects based on new technologies, such as Artificial Intelligence (AI), the technology blockchain, Big Data, cloud services, and more, to create innovative products that enable new forms of customer-company relationships, all under the careful supervision of regulators.
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