The Ministry of Finance of the Czech Republic has launched a new project to unlock the potential of the FinTech industry in the Czech Republic. The project aims to encompass a feasibility study on the potential of data in financial services and the possible establishment of a sandbox in the Czech Republic to allow FinTech innovation on the basis of data sharing and usage.
“The Czech financial authorities understand the priority of fostering FinTech innovation in Czech Republic, as a way to drive productivity gains, create jobs and promote economic growth, encourage competition in financial services, but also as a way to allow consumers better control and better use data potential”, highlighting that “this project shall bring resources to unleash wide scale of data usage for our citizens, financial markets, and our economy,” stated Jiří Georgiev, Deputy Finance Minister of the Czech Republic.
This is great news for the local innovation and entrepreneurial ecosystem as the new project will back up many of the small companies and startups in the financial sector. With the growing digitization and endless financial technologies that make money exchange and payments easier, it is crucial for European countries to provide new solutions and services in the fintech sector. After all, Czechia is home to many successful fintechs such as Twisto, Yieldigo, Resistant AI, Bound.
The role of sandboxes
The project of the Czech Ministry of Finance is supported and funded by the European Union through the Technical Support Instrument (TSI) and implemented by the Organisation for Economic Co-operation and Development (OECD), in cooperation with the European Commission’s Directorate-General for Structural Reform Support (DG REFORM).
Regulatory sandboxes allow existing and potential financial market participants to test financial innovations in a live environment under the guidance and supervision of the relevant financial authorities, usually, the national bank, reports Emerging Europe. In fact, the Czech National Bank (CNB) has established a new specialized communication channel to receive FinTech-related inquiries – FinTech contact point.
“Further promotion of FinTech innovation has the potential to provide important benefits to the Czech economy. The sandbox will foster better use of financial services by all economic actors, then enabling a significant growth potential for these markets, while regulating them, ensuring consumer protection, market integrity, and financial stability,” said Mario Nava, DG Reform’s Director-General.
According to the official page of the OECD project, the development of the FinTech sandbox is a milestone in the digital pillar of the Czech National Recovery and Resilience Plan. The Resilience Plan itself is focused on digital technologies and aims at creating sandboxes in regulated sectors in line with EU priorities. Its successful completion will have significant importance from political, economic, and social perspectives, contributing to the top EU priorities – Green and Digital Transition.
One of the biggest advantages is that the regulatory sandboxes help fintechs and authorities to exchange know-how, allowing them to learn about new trends and products, and to adapt their regulations accordingly.
In 2021, Greece launched a similar EU-funded regulatory sandbox to encourage fintech initiatives. Lithuania launched its fintech sandbox even earlier, in 2018.