Phoenix, Arizona - Attorney General Mark Brnovich Tuesday highlighted several improvements to Arizona’s FinTech Sandbox program that are now in effect as the result of legislation passed this past session.
Brnovich also announced Arizona’s participation in the American Consumer Financial Innovation Network, an initiative of state and federal regulators spearheaded by the Consumer Financial Protection Bureau designed to facilitate consumer-beneficial innovation in markets for consumer financial products and services.
Several updates and improvements were made to the Arizona FinTech Sandbox during the most recent legislative session. Through the enactment of House Bill 2177, legislation sponsored by Representative Jeff Weninger, newly adopted improvements to the nation's first FinTech Sandbox program include:
- Businesses that provide a “substantial component of a financial product or service” are now eligible to participate, which will allow for tests of products that affect how financial services are provided in the marketplace even if the product itself is not regulated. This change will enable regulatory technology (“RegTech”) products to now seek entry into the Arizona sandbox as standalone participants.
- Sandbox applicants also now must demonstrate the cybersecurity measures they will undertake as part of a sandbox test to ensure consumer data remains private and protected.
- Sandbox tests involving payments will no longer require that consumers reside in Arizona to participate in a test as long as the transaction occurs in Arizona.
Attorney General Brnovich also announced his office’s participation in the American Consumer Financial Innovation Network (“ACFIN”), an initiative announced today by the Consumer Financial Protection Bureau. ACFIN will bring together both state and federal financial services regulators from across the United States to provide a forum for collaborating on innovation-fostering programs. ACFIN will seek to advance innovation that benefits consumers by enhancing competition, consumer access, and financial inclusion across its membership.
“The success of Arizona's FinTech Sandbox has demonstrated that these programs are useful and provide value to innovators. Collaboration among regulators will be vital to further developing these programs, finding best practices, and reducing unnecessary regulatory burdens," said Attorney General Mark Brnovich.
Membership in the ACFIN is open to all state attorneys general, or state or federal financial regulators that license, supervise, or examine the offering of consumer financial products or services. The ACFIN will help promote regulatory knowledge and certainty for innovators and help regulators keep pace with innovation in order to help ensure consumer financial services markets are free from fraud, discrimination, and deceptive practices. This enhanced federal-state collaboration also promotes consistency in the regulation of consumer financial products and services, benefiting consumers and enhancing competition.
Initial members of ACFIN include the Attorneys General of: Alabama, Arizona, Georgia, Indiana, South Carolina, Tennessee, and Utah.
"The Arizona FinTech Sandbox is the most active and successful regulatory sandbox in North America," said Brnovich. "Given the expertise the Arizona Attorney General's Office has developed in administering the sandbox over the last year, we are looking forward to this joint effort and are encouraged to see the federal government further recognize the importance of innovation and working with the states to improve our regulatory system.”
Arizona launched its first-in-the-nation FinTech Sandbox in August 2018 to ease regulatory burdens for entrepreneurs and businesses offering innovative financial products and services. The program enables limited tests of innovative FinTech products under the supervision of the Arizona Attorney General's Office while providing regulatory flexibility that nevertheless maintains compliance with Arizona’s core consumer protection laws.