The European Union`s banking watchdog said guidelines being drawn up for nurturing cross-border fintech companies will include recommendations for the core design of a "sandbox" and innovation hub.
The sandbox, or controlled environment some countries offer fintech firms for testing new applications on real customers, was first launched by Britain and is regarded by the sector as having helped London become a major fintech hub.
Just two other EU countries, Denmark and the Netherlands, have sandboxes and Britain`s departure from the EU next year has put pressure on Brussels to step up efforts to encourage fintech firms to set up shop in the European Union.
Elisabeth Noble, a policy expert at the European Banking Authority (EBA), said the watchdog will publish its guidelines in December.
"Our report in December will include an analysis comparing the existing sandboxes and innovation hubs, and recommendations for the core design of a sandbox and innovation hub," Noble told Reuters in a briefing.
Innovation hubs provide a forum for regulators and fintech firms to discuss ideas, while sandboxes allow them to test new products, such as making payments using a smartphone, on real customers - all without having to go through a costly and lengthy full authorisation process first.
"We hope this report will lead to a common and more coordinated approach, to help with cross-border scaling up of fintech firms, which needs sandboxes and innovation hubs working together," Noble said.
The introduction at the start of this year of new EU cross-border electronic payments rules which allow startups to access a customer`s banking data to offer new services, is driving demand for more sandboxes.
Felix Hufeld, head of German regulator Bafin has said he does not want to give startups "little buckets and spades" to avoid the full panoply of financial rules, but Noble said that would not be the case.
"Sandboxes are not light touch. They can enable the use of appropriate tools for a more proportionate approach, but none entail brand new powers, just existing powers in a new context," she said.
Spain has made proposals for opening sandboxes, which have been put out for public consultation, and Noble said two other EU countries have detailed preparations for opening sandboxes, but did not say which countries.
There are already 16 innovation hubs or forums across the EU, including in Britain, for fintech firms and regulators to discuss ideas.
The EBA recommendations will allow some space for adaptation to national markets, Noble said.
Its analysis so far has not uncovered any barriers in EU law to setting up sandboxes but some national regulators have not done so because of a lack of resources, Noble said.
About 90 businesses have used the sandbox set up by Britain`s Financial Conduct Authority in May 2016 to test new products like crypto assets, services and business models.
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