Regulator Reputation and Stakeholder Participation: A Case Study of the UK’s Regulatory Sandbox for Fintech

Lauren Fahy

doi:10.1017/err.2021.44

Abstract

This article contributes to the discussion about managing the risks and uncertainties of emerging technologies through increased stakeholder participation. Authorities have increasingly invited stakeholders from high-technology sectors to participate in assessing the risks of, and designing responses to, new technologies. Yet authorities often struggle to attract stakeholders from such sectors to participate; a critical challenge identified but still undertheorised in the literature. Responding to this gap, this article presents a case study of the UK’s regulatory sandbox for financial technologies, applying a document study, questionnaire and interviews to explore fintech firm motivations and apprehensions about participation. Drawing on the bureaucratic reputation literature, the study finds that fintech firms have a range of practical, reputational and normative motivations to participate, and these motivations are inextricably tied to the regulator’s strong reputation with the sector as procedurally correct, high-performing and morally committed to facilitating innovation. On this basis, recommendations for practitioners and hypotheses for future research into the drivers of stakeholder participation in regulatory decision-making surrounding emerging technologies are proposed.

Highlights

The European Union (EU) has a longstanding strategic goal of making Europe the world’s most competitive knowledge-based economy.[1]
Drawing on the bureaucratic reputation literature, the study finds that fintech firms have a range of practical, reputational and normative motivations to participate, and these motivations are inextricably tied to the regulator’s strong reputation with the sector as procedurally correct, highperforming and morally committed to facilitating innovation
This study aims to empirically examine what motivates stakeholders to participate in the Financial Conduct Authority (FCA)’s sandbox, drawing on bureaucratic reputation scholarship

Summary

Introduction

The European Union (EU) has a longstanding strategic goal of making Europe the world’s most competitive knowledge-based economy.[1] This goal has led to the continuous search for better regulatory approaches, balancing facilitating innovation with managing the risks of new technologies. Central to these approaches has been encouraging active participation by stakeholders from high-technology sectors (scientists, universities, research organisations, firms, etc.).[2] New technologies are. 2 M-V Florin, “Dealing with the challenge of evidence-based decision-making in situations of uncertainty and emergency” (2014) 5 European Journal of Risk Regulation 303. Greater stakeholder participation can increase the transparency and legitimacy of regulatory responses to new technologies.[4]

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Conclusion