The Central Bank (CB) is set to overhaul its regulatory sandbox framework, aiming to ease stringent regulations that have deterred fintech engagement in the program over the past four years.

Manisha Wimalasuriya, Additional Director of CB's Payments and Settlements Department, revealed that despite receiving six applications, none have successfully navigated the sandbox process, with the latest involving AI technology.

One of the main hurdles cited was the requirement for costly audit reports, which proved prohibitive for fintech startups uncertain about market viability. The CB's sandbox initiative, intended to foster innovation in fintech by facilitating the testing and approval of new products, has struggled to attract participants under the existing stringent conditions.

Initially launched to drive financial intermediation, enhance financial inclusion, and promote digitization, the sandbox has faced criticism for its regulatory complexities, hindering the very innovation it sought to promote.

Acknowledging the need for reform, Wimalasuriya hinted potential revisions to align with India's more flexible Proof of Concept (POC) approach, which has bolstered India's fintech ecosystem as a hub of innovation and entrepreneurship.

The impending revisions aim to strike a balance between regulatory oversight and fostering a conducive environment for fintech experimentation, potentially unlocking a wave of innovation in Sri Lanka's financial landscape.