Fintech Supervisory Sandbox (FSS)

The Fintech Supervisory Sandbox (FSS), launched by the HKMA in September 2016, allows banks and their partnering technology firms (tech firms) to conduct pilot trials of their fintech initiatives involving a limited number of participating customers without the need to achieve full compliance with the HKMA's supervisory requirements. This arrangement enables banks and tech firms to gather data and user feedback so that they can make refinements to their new initiatives, thereby expediting the launch of new technology products, and reducing the development cost.

In addition to the pilot trial function offered by FSS 2.0, FSS 3.0 facilitates eligible trial projects of research and development (R&D) to apply for a maximum of HK$1 million funding support under the Innovation and Technology Commission (ITC)'s Public Sector Trial Scheme (PSTS).

To enhance FSS 3.0, the HKMA collaborated with Hong Kong Cyberport Management Company Limited (Cyberport) to pilot FSS 3.1 (FSS 3.1 Pilot), another track of funding scheme, in October 2022. Following the successful completion of the scheme, the second round of FSS3.1 Pilot is launched in November 2024.

FSS 2.0

In the light of the experience obtained in operating the FSS, the HKMA upgraded the FSS to FSS 2.0 in 2017. FSS 2.0 has the following new features:

A Fintech Supervisory Chatroom (Chatroom) to provide feedback to banks and tech firms at an early stage of their fintech projects ;
Tech firms can access the Sandbox by seeking feedback from the HKMA through the Chatroom without going through a bank; and
The sandboxes of the HKMA, the Securities and Futures Commission (SFC) and the Insurance Authority (IA) are linked up so that there is a single point of entry, if needed, for pilot trials of cross-sector fintech products.

To help develop the Regtech ecosystem, the FSS (including the Chatroom) is also open to Regtech projects or ideas raised by banks or tech firms.

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Operating Principles
The HKMA has adopted the following principles in operating the FSS:
1. The FSS is available to fintech and other technology initiatives intended to be launched in Hong Kong by banks;
2. The management of a bank that is allowed to use the FSS should ensure that the following safeguards are in place:
  - Boundary – Clear definitions about the scope and phases (if any) of the pilot trial, the timing, and termination arrangements;
  - Customer protection measures – Measures for protecting the interests of customers during the trial, which generally cover the selection of customers who understand the associated risks and voluntarily join the trial, complaint handling, compensation of any financial losses suffered by customers, and arrangements for customers to withdraw from the trial;
  - Risk management controls – Compensating controls for mitigating the risks arising from less than full compliance with supervisory requirements and the risks posed to the bank’s production systems and other customers; and
  - Readiness and monitoring – Readiness of the systems and processes involved in the trial and close monitoring of the trial.
3. The FSS should not be used as a means to bypass applicable supervisory requirements.
The HKMA has not laid down an exhaustive list of the supervisory requirements that may potentially be relaxed within the FSS environment. Banks and their partnering tech firms intending to access the FSS are advised to get in touch with the HKMA early. The HKMA stands ready to discuss with them individually on the appropriate supervisory flexibility that can be made available within the FSS.
Usage of the FSS (As of end-Oct 2024)

As of end-Oct 2024, pilot trials of 354 fintech initiatives had been allowed in the FSS. Separately, banks have collaborated with tech firms in 245 trial cases. Banks and their partnering tech firms that use the FSS are able to gather real-life data and user feedback on their new fintech products or services more easily, so that they can make refinements to them as appropriate before the full launch. Hence, the FSS facilitates banks and their partnering tech firms to rollout fintech initiatives earlier, at a lower cost and with better quality upon full product launch. Please refer to the following chart for further details.
Cross-sector Fintech Services

The HKMA, the SFC and the IA have launched their respective sandboxes. If a firm intends to conduct a pilot trial of a cross-sector fintech product, it may apply to seek access to the sandbox it considers most relevant. The regulator will act as the primary point of contact and assist in liaising with the other regulators for the firm to access the sandboxes concurrently. Below are links to contact points of the sandboxes operated by the SFC and the IA.

SFC Regulatory Sandbox

IA Insurtech Sandbox
Cross-border Testing Pilot Arrangement

The FSS has been linked with similar pilot testing facilities of overseas supervisory authorities. On 29 October 2020, the Global Financial Innovation Network (GFIN), a group of international organisations including the HKMA, launched a new cohort of the cross-border testing pilot and invited applications from firms wishing to test innovative financial products, services or business models across more than one jurisdiction. For details, please refer to the link below:

GFIN applications for cross-border testing pilot

FSS 3.0

Launched in November 2021, FSS 3.0 facilitates tech firms to apply for funding supports under ITC’s PSTS for Technology Companies (PSTS-TC) or PSTS for Incubatees & Graduate Tenants of Science & Technology Parks Corporation and Hong Kong Cyberport Management Company Limited (PSTS-SPC).

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Eligibility Criteria
- A local tech firm applicant should form a partnership with a bank in Hong Kong for application purpose.
- To be eligible for receiving facilitation from the HKMA, the trial projects must be able to demonstrate that it has the potentials to reinforce the public objectives of the HKMA. If so assessed, the HKMA will issue a ‘letter of support’ to facilitate the tech firm applicant to further apply for ITC’s PSTS funding.
- The tech firm applicant should also fulfil all the eligibility criteria, including the R&D requirements, set under the ITC’s PSTS-TC or PSTS-SPC in order to be eligible for obtaining the funding support.
- An initial focus of trial project themes to be considered by the HKMA includes AML/CFT regtech applications by banks and other areas that fit HKMA’s regulatory or supervisory mandate.
Application procedure
- Interested tech firms and their partnering banks should jointly submit a proposal and information of their trial projects to the HKMA for an assessment of ‘fitness for public objective’.
- If the trial projects are assessed to be fit for purpose, the HKMA will issue to the tech firm applicant a ‘letter of support’ for the purpose of PSTS-TC / PSTS-SPC application.
- With the letter of support, tech firm applicants may then submit their application and proposal to the ITC in accordance with the ITC’s PSTS application procedures.

FSS 3.1 Pilot (2024)

The FSS 3.1 Pilot provides development-stage funding support for innovative fintech solutions to promote commercialisation and wider adoption of the projects which fit into the HKMA’s regulatory mandate. The FSS 3.1 Pilot is administered by Cyberport.

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Eligibility Criteria

Applicants applying for funding subsidy under the FSS 3.1 Pilot must fulfil the following requirements:

a)	Be registered in Hong Kong under the Business Registration Ordinance (Cap. 310) and commenced business in Hong Kong before submission of the application;
b)	Conducting substantive Fintech activities (refer to https://fss2024.cyberport.hk for more details) in Hong Kong, the Mainland or overseas. Eligibility of applicants will be separately verified and assessed where necessary; and
c)	Have a bank in Hong Kong as a project sponsor.

Qualifying FSS 3.1 Pilot projects must:

a)	Have successfully participated in a Pilot or Proof-of-Concept program(s) sponsored or supported by a government bureau or department, a regulator, or a reputable organisation; or have won an award in a relevant fintech competition(s);
b)	Support HKMA initiatives, such as i) Central Bank Digital Currency (CBDC), ii) Commercial Data Interchange (CDI), iii) Interbank Account Data Sharing (IADS), iv) Regtech, and/or v) Risk Management;
c)	Address a practical issue or a pain point faced by the banking industry with no prior use case in the market;
d)	Be governed by a sponsorship agreement or letter of intent in writing between the applicant and the project sponsor; and
e)	Demonstrate strong potential for commercialisation.

For more details, please refer to the dedicated website for the FSS 3.1 Pilot (https://fss2024.cyberport.hk).

Application procedure
- The application process will begin from 29 November 2024 and end on 21 February 2025.
- Applicants must submit their applications, along with the required documents listed on the dedicated website for the FSS 3.1 Pilot, via email to fss2024@cyberport.hk.
For more details, please refer to the dedicated website for the FSS 3.1 Pilot (https://fss2024.cyberport.hk).

If a firm plans to make use of the FSS for conducting pilot trial of its fintech products, please contact the HKMA through the email address below:

hkma_sandbox@hkma.gov.hk

If a tech firm wishes its trial project to be evaluated for the issuance of ‘letter of support’ for PSTS funding application under FSS 3.0, please contact us through the email address below:

fss3.0@hkma.gov.hk

For enquiries about the FSS 3.1 Pilot, please contact Cyberport, administrator of the scheme, through the email address below:

fss2024@cyberport.hk

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