Covid-19 has contributed to growing interest in financial technology innovation as a means of addressing the pandemic’s economic impacts. The New York Department of Financial Services (DFS) on June 9 announced a program to encourage fintech innovation for the post-pandemic economic recovery, which it calls DFS FastForward.
Intended to assist fintech companies and other innovators with regulatory compliance, FastForward is not another state regulatory sandbox; the program’s stated intent is to provide innovators with guidance on compliance with DFS regulations, not with relief from those regulations.
Regulatory Guidance for Post-Pandemic Recovery
DFS based FastFoward on a pre-pandemic program announced earlier in 2020. In February, DFS launched a pilot program for assisting insurance technology companies, called Project Whitehall. Project Whitehall was intended to assist insurtech innovators and startups looking for information and guidance on how DFS regulations apply to their business. FastFoward extends similar treatment to financial services, fintech, and health technology innovators, in addition to insurtech. The program is primarily for ideas related to Covid-19 recovery, particularly in the form of innovations to help small businesses, to ease access to health care through healthtech tools such as telehealth, and to help households build greater financial resilience.
Access to the FastForward program is granted through a platform called DFS Next. Applicants can submit inquiries on regulatory questions using an online form. Meetings with DFS staff, either in person or virtual, are offered to give applicants more information and the opportunity to engage informally with DFS.
Don’t Call It a Sandbox
FastForward bears some resemblance to the regulatory sandbox programs implemented by several other states—Arizona, Wyoming, Utah, Kentucky, Vermont, Nevada, and Hawaii, as of June 2020—but it clearly is not a regulatory sandbox.
State regulatory sandboxes have been enacted by state laws (or by state regulatory agency action in the case of Hawaii) to provide innovators with temporary relief from state regulatory requirements as well as advice on regulatory requirements. FastForward is not intended to provide relief from any New York regulations.
This approach is consistent with the regulatory agency’s long-standing opposition to sandboxes and the regulatory relief that they provide.
Former DFS Superintendent Maria Vullo famously criticized regulatory sandboxes in 2018, calling the concept “preposterous. Toddlers play in sandboxes. Adults play by the rules.” Current DFS Superintendent Linda Lacewell has continued her predecessor’s policy regarding regulatory sandboxes, although without providing any equally attention-getting quotes.
With FastForward, DFS has moved rapidly to establish New York’s approach to aiding fintech innovators in response to the economic effects of the Covid19 pandemic. The program’s impact, compared to those of the regulatory sandboxes created by other states, should become apparent as 2020 unfolds.
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