ADGM's new Digital Lab to replace RegLab sandbox
Abu Dhabi Global Market (ADGM) has launched their Digital Lab, a regulated digital environment to allow financial institutions, technology vendors and FinTech startups to collaborate around new products and business models, under the supervision of the financial regulator.
Their previous regulatory sandbox, RegLab, that was launched three years ago, will eventually be phased out in light of the new Digital Lab, said Wai Lum Kwok, Senior Executive Director (Capital Markets) at Financial Services Regulatory Authority (FSRA) of ADGM, in a phone interview with SME10X.
Wai Lum Kwok explained that existing cohorts of FinTech startups under the RegLab programme will be migrated onto the Digital Lab’s platform. The next batch of applicants to the sandbox regime will get to develop and test their FinTech products and solutions in the Digital Lab.
The Digital Lab will broker a safe relationship between financial institutions and startups with regulatory supervision.Wai Lum Kwok, Senior Executive Director (Capital Markets) at FSRA ADGM.
Giving insight into the reasons behind these decisions, Christopher Kiew-Smith, Head of FinTech Strategy at FSRA ADGM, revealed to SME10X that the RegLab and other regulatory sandboxes like it, faced a difficult challenge: while there were many banks who were interested in partnering with a regulatory sandbox, the adoption rate into business as usual of the technology itself was relatively low. This posed challenges for startups as well who were looking to enter the market through these partnerships.
He further explained that the RegLab was an offline sandbox model that evaluated startups based on regular presentations and reviews of monthly reports. This offline model of testing wasn’t ideal in an environment wherein the startups were working online on innovative technologies. To address this mismatch, the Digital Lab sandbox was set up.
Barry West, Head of Emerging Technology at FSRA ADGM, told SME10X that the new sandbox follows the same admission criteria as the RegLab did.
Furthermore, Wai Lum said that the new sandbox allows regulators and the ADGM team to have real-time insights into the workings of startups through online dashboards, giving them a much more transparent and in-depth view of the technology and its adoption. This is also a benefit for banks looking to adopt the new FinTech technologies, as they get a better understanding of how it works and how they can align it with their current systems.
In addition to transparency, the team emphasised upon how the new Digital Lab enables greater collaboration and interoperability between teams. It also removes the time-consuming process of building reports and presentations and freeing up time for entrepreneurs to work on more business-critical aspects of their startups.
The Digital Lab’s platform is built to standardise the technologies enabling FinTech, such as APIs and tools for dummy data, system images and virtual machines. By using these tools to create representations of the institution’s systems and data on a dummy basis, this will support in making FinTech solutions easier to adopt for the banks and other financial institutions.