The Bankers Association of Zambia (BAZ) says the introduction of the Central Bank regulatory sandbox will give banks an opportunity to refine new products and services before obtaining regulatory approval and putting them on the market thereby avoiding market credibility risks.
The Bank of Zambia (BoZ) identified the need to develop sandbox regulations for FinTech companies and financial institutions, to foster innovation whilst managing the risks that these technologies may present and set up a sandbox regulatory framework to allow for controlled live testing of innovations under its supervision.
A regulatory sandbox is a framework set up by a regulator that allows financial technology – fintech start up or new product innovations to conduct live experiments in a controlled environment under a regulators supervision. According to BoZ, the Regulatory sandbox is one of the initiatives that falls in its strategic plan and is an enabler of development in terms of financial products and services.
Speaking in an interview with the Zambian Business Times-ZBT, BAZ chief executive officer Leonard Mwanza said the regulatory sandbox would allow the testing of new innovations before they are fully ready for the market.
Mwanza said by operating in the sandbox, banks and startup companies will be able to test a variety of innovative products, services and other emerging financial technologies that have the potential to transform the financial sector and promote financial inclusion before they are deployed on the market.
“As you may be aware, the process of developing a product requires the developer, which can be a bank or a startup entity to invest some money in the technology. So if the product is put on the market and then it fails to perform according to the expectations, it creates market credibility and financial losses if the product has to be withdrawn from the market.
“Banks usually come up with products that are technologically inclined and might want to test them or put them in an incubation before they can fully put them on the market,” he said.
Commenting on the Central Bank’s move to adjust upwards the daily limit for over-the-counter cash transactions for commercial bank account holders from US$5, 000 to US$10, 000, Mwanza said the banks are already complying with the new regulation.
“Commercial banks have already complied with the new regulation to allow customers to buy or sell forex over the counter up to US$10, 000. Before this, banks were only allowing US$5000 but now it’s US$10,000. “This move will help cross border traders who mostly deal with foreign currency for trade,” he said.
