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Inside the regulatory sandbox: effects on fintech funding

Giulio Cornelli, Sebastian Doerr, Leonardo Gambacorta () and Ouarda Merrouche

No 901, BIS Working Papers from Bank for International Settlements

Abstract: Policymakers around the world are adopting regulatory sandboxes as a tool for spurring innovation in the financial sector while keeping alert to emerging risks. Using unique data for the UK, this paper provides initial evidence on the effectiveness of the world's first sandbox in improving fintechs' access to finance. Firms entering the sandbox see a significant increase of 15% in capital raised post-entry, relative to firms that did not enter; and their probability of raising capital increases by 50%. Our results furthermore suggest that the sandbox facilitates access to capital through two channels: reduced asymmetric information and reduced regulatory costs or uncertainty. Our results are confirmed when we exploit the staggered introduction of the sandbox and compare firms in earlier to those in later sandbox cohorts, and when we compare participating firms to a matched set of firms that never enters the sandbox.

Keywords: fintech; regulatory sandbox; startups; venture capital. (search for similar items in EconPapers)
JEL-codes: G32 G38 M13 O3 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2020-11
New Economics Papers: this item is included in nep-ban, nep-cfn, nep-ent, nep-eur, nep-fdg, nep-fmk, nep-pay and nep-sbm
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Citations: View citations in EconPapers (3) Track citations by RSS feed

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Working Paper: Inside the Regulatory Sandbox: Effects on Fintech Funding (2020) Downloads
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