… As CBN issues fresh regulatory framework for Sandbox Operations…
– Sandbox is a process that encourages innovation that can improve the design and delivery of payment services.
The Central Bank of Nigeria, CBN, has released the eligibility criteria for applicants to become Sandbox Operators.
As highlighted in the latest report by CBN, titled “Issuance of the Framework for Regulatory Sandbox Operations”, the report explains that Sandbox is a closed testing environment designed for experimenting safely with web or software projects.
In view of increasing consumer-appetite for payment solutions and emerging disruptive technology in the financial services space, CBN has deemed it pertinent to ensure new and more flexible ways of engagement with the industry.
One of the options considered by the Apex Bank is the ‘Regulatory Sandbox’.
Regulatory Sandbox is a formal process for firms to conduct live tests on innovative products, services, delivery channels, or business models in a controlled environment.
According to the report, the Sandbox application process is open to both existing CBN licenses (financial institutions with FinTech initiatives) and other local companies.
Companies classified under the local companies may include financial sector as well as technology and telecom companies intending to test an innovative payment product or service industry deemed acceptable by the CBN.
Others that can also apply include: Those proposing non-regulated financial products and services using emerging technologies, i.e., Innovators whose proposed solution involves technologies which are currently not covered under existing CBN regulations.
The eligibility criteria to become a Sandbox Operator include the following:
(a) The product, service or solution you are bringing should be innovative with clear potential(s) to:
i. Improve accessibility, customer choices, efficiency, security and quality in the provision of financial services; or
ii. Enhance the efficiency and effectiveness of Nigerian Financial Institutions management of risks; or
iii. Address gaps in or open up new opportunities for financial benefits or investments in the Nigerian economy.
(b) Ensure that applicants will provide the proposed project within a limited transaction (value and volume) for better risk management and mitigation. The limits shall not be exceeded during the testing period.
(c) The applicant has conducted an adequate and appropriate assessment to demonstrate the usefulness and functionality of the product, service or solution and identified the associated risks which should be devoid of adverse effect to existing structures and consumer experience;
(d) The applicant has the necessary resources to support testing in the sandbox. This includes the required resources and expertise to mitigate and control potential risks and losses arising from offering of the product, service or solution;
(e) The applicant should have a business plan to show that the product, service or solution can be successfully deployed after exit from the sandbox.
How to Apply:
Applications to the sandbox process would involve an invitation placed on the CBN website, and local newspaper advertisement.
The details of the advert would include the minimum eligibility criteria to shortlist applicants who qualify to be absorbed into the sandbox.
Receipt of application shall be acknowledged to applicants within 5 working days after submission.
Firms wishing to apply for the CBN’s Regulatory Sandbox can download the online application on CBN’s website.
The application must be submitted to Sandbox@cbn.gov.ng with a cover letter signed by an authorised signatory of the entity and addressed to the Director, Payments System Management Department, Central Bank of Nigeria, Abuja.
The Bank will inform each applicant of its eligibility and approval to participate in the program, 45 working days after the closure of the application window.
A Letter of Approval (LoA) would be issued to the Innovator which would allow Sandbox participants to test their innovation upon entry into the sandbox.
For Organizations, there are Documentary Requirements, where all application trials shall be accompanied with the following:
i. Board Approval (where applicable)
ii. Certificate of Incorporation
iii. The company profile and functional contact: e-mails, telephone numbers, office and postal addresses
iv. Memorandum of Association Shareholding structure of the Company
v. Forms CAC 1.1 (Application for Registration)
vi. CVs of Board and Management of the Company
vii. Organogram of the Company
viii. Project plan alongside a detailed business proposal
ix. Key outcomes that the testing is intended to achievex. A document that shall outline the strategy of the sandbo
x. trials including current and potential engagements, geographical spread and benefits to be derived
xi. AML/CFT Policy
xii. Evidence of patent certificates or registration of patent rights, where applicable
xiii. All firms shall supply any other information that the CBN may require from time-to-time.