RBI Says Cross-Border Payments Products of Four Firms Viable Under Regulatory Sandbox

Products offered by four entities for ‘cross border payments’ have been found viable by the Reserve Bank of India (RBI) after they completed the test phase under the regulatory sandbox scheme. 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 four entities are Cashfree Payments India, Fairex Solutions, Nearby Technologies and Open Financial Technologies.

“The products were evaluated based on mutually agreed test scenarios and expected outcomes. All… four products have been found viable within the boundary conditions defined during testing under Regulatory Sandbox,” RBI said in a statement on Tuesday.

The entities have now exited the second cohort of the regulatory sandbox on ‘cross-border payments’, it said, and added the products found acceptable under the cohort may be considered for adoption by regulated entities subject to compliance with applicable regulatory requirements.

In the second cohort under the regulatory sandbox, eight entities had commenced testing of their products.

The product of Cashfree Payments India extends a cross-border payment platform to facilitate the purchase of assets listed on foreign exchanges (eg. NASDAQ) like publicly listed shares and exchange-traded funds.

The product of Fairex Solutions provides an aggregation platform of leading cross-border payment providers for outward remittance.

Nearby Technologies has developed a product to facilitate routing the inward cross border remittance to the beneficiary’s Aadhaar number as a virtual bank account using existing Rupee Drawing Arrangement (RDA) mechanism.

The product tested by Open Financial Technologies provides a blockchain-based cross border payment system, leveraging the current infrastructure and ensures frictionless and tamper proof monitoring capabilities.

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 products.

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

As per 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 Partnerships (LLPs) and partnership firms, partnering with or providing support to financial services businesses.