Hong Kong’s FinTech ‘Sandbox’: 10 Things You Need to Know


The Monetary Authority (HKMA) this week launched its Supervisory (Sandbox) to facilitate the pilot trials of FinTech and other initiatives by before they are launched on a larger scale. This is a positive development for Hong Kong’s FinTech and financial services industries.

Here are 10 things you need to know about the Sandbox:

1. Goal

The HKMA wants to provide a supervisory arrangement that gives greater flexibility to banks to test new initiatives before their formal launch. The goal is to gather real-life data and user feedback in a controlled environment. This can apply to any initiative from biometric authentication and to robotics and augmented reality.

2. Benefit

The Sandbox allows a bank to test a new initiative without the need to achieve full compliance with the HKMA’s usual supervisory requirements during the test period (e.g. security-related requirements for electronic banking services).

3. Scope

The Sandbox will be available to Fintech as well as other technology initiatives intended to be launched by banks.

4. Boundaries

The HKMA requires that clear definitions be set-up on the scope and phases (if any) of the trial (e.g., size and types of customers involved, technologies and types of banking services covered), the timing and the termination arrangements.

5. Participants

The Sandbox will allow banks to conduct pilots involving actual banking services and a limited number of participating customers (e.g. staff members, customer focus groups).

6. Customer Protection

Adequate measures need to be put in place to protect customers during the trial. These should generally include a proper process for selecting customers who understand the associated risks and voluntarily want to join the trial, an enhanced complaint handling procedure, a mechanism for timely and fair compensation of customers’ financial losses caused by any failures of the trial, and appropriate arrangements for customers to withdraw from the trial.

7. Risk Management

The HKMA requires that reasonable compensating controls be implemented to address the risks posed by the trial on the bank and customers as well as to mitigate the risks arising from the exemption from full compliance with the supervisory requirements.

8. Active Monitoring

Any trial needs to be subject to close monitoring so that the bank can promptly identify and handle any significant problems or incidents that may arise.

9. Flexibility

The HKMA does not intend to stipulate an exhaustive list of supervisory requirements that may potentially be relaxed within the Sandbox. As this is a new supervisory arrangement, the HKMA will refine the arrangement over time in the light of implementation experience and industry development.

10. Contacting the HKMA

Banks intending to use the Sandbox should get in touch with the HKMA beforehand to discuss the appropriate supervisory flexibility that can be made available to them within the Sandbox.

The HKMA’s announcement of the Sandbox can be found here and the speech by the HKMA’s Chief Executive Norman Chan announcing the Sandbox here.


Feel free to contact me via LinkedIn for any FinTech related matters. For media inquiries or speaking engagement requests, please contact [email protected]

Yours in FinTech,

Henri Arslanian

***Henri Arslanian is an Adjunct Associate Professor at Hong Kong University where he teaches graduate courses on Entrepreneurship in Finance as well as the first FinTech course in Asia. His upcoming book on Entrepreneurship in Finance will be published in late 2016 by Palgrave Macmillan.

A member of the Milken Institute’s Young Leaders Circle, Henri is a regular speaker globally on the topic of FinTech and hedge funds to various audiences, ranging from TEDx  to Fortune 500 management teams. He currently sits on a number of other finance, academic, civil society, and FinTech related boards and advisory committees, including the HKSFA FinTech Committee and the Hong Kong FSDC FinTech Project team.

Henri was recently with a FinTech start-up and previously spent many years with UBS Investment Bank in Hong Kong. He started his career as a financial markets and funds lawyer in Canada and Hong Kong.