6 entities complete test phase in 'First Cohort' under Regulatory Sandbox

The Reserve Bank on Monday said six entities have completed the test phase in the 'First Cohort' under the Regulatory Sandbox scheme with retail payments as theme and their products are found viable for adoption by the regulated entities.

Their products mainly deal with offline digital payments, prepaid cards, contactless payment and voice-based UPI.

Regulatory sandbox usually refers to live testing of new products or services in a controlled/test regulatory environment for which regulators may (or may not) permit certain relaxations for the limited purpose of the testing.

The entities whose products have been found meeting the norms set by the RBI in the First Cohort are Nucleus Software Exports (PaySe), Tap Smart Data Information Services (Citycash), Natural Support Consultancy Services (IND-e-Cash), Naffa Innovations (ToneTag), Ubona Technologies (BHIM Voice) and Eroute Technologies (offline payment using SIM).

These products were evaluated based on mutually agreed test scenarios and expected outcomes, the RBI said, adding "all the products have been found viable within the boundary conditions defined during testing under the Regulatory Sandbox".

These entities, the RBI said, have now exited the First Cohort of the Regulatory Sandbox on 'Retail Payments'.

"The products found acceptable under this Cohort may be considered for adoption by regulated entities subject to compliance with applicable regulatory requirements," it said.

Under the 'Second Cohort' for cross-border payments, the RBI said that it has received 27 applications from 26 entities of which eight have been selected for the 'Test Phase'.

The selected entities are Book My Forex, Cashfree Payments, Fairex Solutions, Flyremit, Nearby Technologies, Open Financial Technologies, SoCash India and Wall Street Finance.

These entities will commence testing of their products from the third week of September 2021.

The theme for the 'Third Cohort' under the Regulatory Sandbox will be 'MSME Lending' and entities keen to participate in the exercise can submit their applications to the RBI from October 1, 2021 to November 14, 2021, it said.

The Regulatory sandbox allows the regulator, innovators, financial service providers and customers to conduct field tests to collect evidence on the benefits and risks of new financial.

The objective of the Regulatory Sandbox is to foster responsible innovation in financial services, promote efficiency and bring benefit to consumers.

As per the RBI, first and foremost benefit of regulatory sandbox is that it fosters 'learning by doing' on all sides. Among other benefits, the Regulatory Sandbox could lead to better outcomes for consumers through an increased range of products and services, reduced costs and improved access to financial services.

The target applicants for entry to the Regulatory Sandbox are fintech companies including startups, banks, financial institutions, any other company, Limited Liability Partnership (LLP) and partnership firms, partnering with or providing support to financial services businesses.

The RBI had invited applications for the 'First Cohort' in November, 2019 and for the Second Cohort with theme of 'Cross Border Payments' in December, 2020.

In December, 2020, it had also announced that 'MSME Lending' would be the theme for the Third Cohort.