Happy as a ‘sandbox’: Bulgaria’s tech upsurge

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV Media network.

The Sofia skyline is also an illustration of the boom of innovative business. [Shutterstock]

The creation of a ‘sandbox’ – a safe environment where FinTech companies can test their products – is big news for Bulgaria and the entire tech community in Central and Eastern Europe, write Eduard Tsvetanov and Filip Genov.

Eduard Tsvetanov and Filip Genov are FinTech professionals with years of global experience in the finance and technology sectors. They are both part of Sophia Lab – an independent, non-doctrinal and non-profit R&D forum. Sophia Lab is amongst the leading CEE platforms for digitalisation, growth and development projects with a focus on both analysis and impact.

On 27 February Bulgaria’s Finance Minister Vladislav Goranov announced the Ministry’s intention to work with the country’s regulators in order to build a RegTech Sandbox in Sofia.

Crudely summarised, a ‘ is a safe environment where FinTech, shorthand for financial technology, companies can test their products, while regulatory bodies, such as financial conduct authorities or central banks, can monitor this process.

How is a sandbox beneficial?

The benefits of the mutual collaboration between companies and regulators lie in that the former can see how their services would perform in a real-time environment. Regulators, on the other hand, are able to better understand new business models, and hence create regulations that address technological progress rather than stifle it.

The creation of such a sandbox is big news for the country and the entire tech community in Central and Eastern Europe, since the IT sector there is booming. Scores of global tech giants turn their eyes to the cheaper labour market with excellent tech talent.

Why Bulgaria?

The country’s IT sector is growing at a pace like never before. In an article titled Bulgaria attracts record tech investment, the Financial Times, which also boasts a tech centre in Sofia, reported in December 2019 that the information and communication technologies sector (ICT) in Bulgaria saw a 45% year-on-year growth in 2018 totalling a sales record of $3.2bn, according to the International Data Corporation.

Bulgaria-based companies, such as F27, Evrotrust, Software Group, ScaleFocus and Motion Software, are already exporting world-class products and services concerned with mobile factoring and supply chain systems, end-to-end digitalisation, digital ID services, SAP solutions, and building high-performing and agile teams.

Export is one thing, however. Bulgaria might be a regional leader in fintech export, yet it is lagging behind in terms of digital adoption locally. The country ranks the lowest in the EU in digital performance, according to the Digital Economy and Society Index 2019.

Essentially, this means that the country is producing and exporting state-of-the-art digital services, yet it struggles to adopt said solutions for its residents.

One viable solution to this is namely the RegTech sandbox. By participating in a sandbox, regulatory institutions will be able to sift through relevant policies that will enable FinTech services to flourish locally.

Under the patronage of Bulgaria’s Ministry of Finance, the Bulgarian National Bank and the Financial Supervision Commission will work together with corporates, distinguished professionals and academics in the (fin)tech field to propel the sector of innovation.

The sandbox is expected to adopt a classic structure composed of several working groups, where experts can make their contributions. The working groups will have permanent members, while the sandbox Secretariat has also foreseen the option to call in on the wider EU community, including European Commission experts, as needed.

What is to come out of it?

Sandboxes reflect the current industrial revolution. And a key aspect of a revolution’s magnitude is its finality: that is, the extent to which we believe the make-over is good for society, hence it is necessary.

It is safe to say digitalisation is here to stay. It is natural to assume that its enabling processes will too. Sandboxes are a young idea and we are yet to measure fully their effectiveness, as regulatory changes take time to assess.

Nevertheless, for the heavily regulated world of finance, sandboxes play a vital role, as they enable global FinTech companies to test their products in markets they have never entered before.

In any case, an open dialogue between regulators and businesses is a good thing. The history of transformation has taught us that ideas are individual, while progress remains communal. A sandbox is a place where good ideas meet their community.

Much like most things in life, however, innovation is a process, not a state. The sandbox in Sofia marks a remarkable step along the way of that process.

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