There are four phases in the sandbox:
Phase 1: Admission
The FinTech or licensed entity with a FinTech project or a FinTech cooperation submits an application for admission to the sandbox to the FMA. The FMA checks that the sandbox criteria are met pursuant to Article 23a para. 2 FMABG:
- Is the business model based on information and communication technology (ICT)?
- Is the business model subject to supervision of the FMA, so is there any obligation to hold a licence?
- Is a threat to financial market stability or consumer protection to be expected?
- It is in the public interest due to its innovative value?
- Is it ready-for-market and ready for testing? Do any legal or technical impediments still exist?
The FMA receives an opinion from an expert committee, the Regulatory Sandbox Advisory Board (Beirat) housed in the Federal Ministry of Finance, regarding the issue of whether the business model is in the public interest, and is ready-for-market and ready for testing.
The admission to the sandbox is then decided upon by means of an administrative decision.
Phase 2: Pre-Support
In this preparatory stage, the close consultation with the sandbox participant begins. In the FMA, a FinTech Supervisory Team is formed for the individual FinTech, that consists of experts from the specialist divisions. At personal meetings with the entity, this team agrees on the test parameters, milestones and timetable for the test, and discusses potential restrictions and conditions attached to the licence. The entity is guided about the implications under supervisory law in the pre-support phase.
A licensing procedure for the test phase is conducted with an unlicensed or registered FinTech. In the case of an incumbent market participant a decision may potentially be required about an extension of an existing licence. In such cases, this phase concluded with the issuing of an administrative decision (granting a licence or registration).
The entity is now allowed to conduct activities requiring a licence within the scope of the test licence / test registration.
Phase 3: the actual test phase
The entity provided services that require a licence or a registration, and is supervised in doing so. Depending on the applicable rules, restrictions and obligations are required to be observed. The test parameters and milestones that were drawn up will be regularly discussed in the management meetings with the FinTech Supervisory Team.
If a licensed entity is in the sandbox together with an unlicensed FinTech, then the latter may be included for example as an outsourcing partner and in particular may participate at management meetings.
Phase 4: Final Report & Exit
The test phase is evaluated and the business model exits the sandbox and is transferred to regular supervision. Where conditions have been imposed, a decision is taken to rescind the obligations or restrictions in the licensing / registration administration decision. This also occurs by means of an administrative decision. New obligations may also be determined in order to transfer the entity into regular supervision.
If the entity decides to change the business model rather than to be subject to future supervision by the FMA, this does not constitute a “negative” outcome for the sandbox: in this case the entity can continue to conduct its business model (e.g. with a cooperation partner that holds a licence).