Pub. 11 2021 Issue 2


AzBA Fintech Council: Background and Current Status

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The term “fintech” is a portmanteau of the terms “financial” and “technology.” It is generally used to refer to innovative information technologies in the financial services industry. The development of highly sophisticated information-technology algorithms over the past several decades has enabled the creation of a new generation of products and services that enhance convenience, speed and accuracy; and that can potentially destabilize entire industries — and create new ones. The Uber ride-hailing app is a good example of this. Applying these relatively new algorithm-based information technologies to the creation of innovative products and services in the financial services sector gave birth to the nascent “fintech industry.”

Launching these new fintech products and services in modern economies carries with it a higher level of risk and difficulty than the introduction of algorithm-based technologies outside of the financial services sector due to the highly regulated nature of the sector itself. While a high degree of regulation is necessary in the financial services sector to protect consumers, it can and does stifle the development and distribution of these new fintech products and services.

In 2016, the United Kingdom carved out a less stringent regulatory environment for companies to market-test new fintech products and services while at the same time maintaining a robust level of consumer protection. This “fintech sandbox” is a temporary regulatory safe harbor for companies seeking to bring new fintech products and services to market. It also limits the raw number of consumers or businesses these companies are permitted to co-opt in order to test their products and services. Other countries — and jurisdictions within them — such as the United States, Singapore, Hong Kong, Thailand, Australia and Switzerland, have followed suit.

In 2018, Arizona became the first U.S. state to officially launch a regulatory sandbox for fintech.

Arizona Attorney General Mark Brnovich was a prime mover of the legislation creating the sandbox. The AzBA played a major role in helping to craft the bill with the AG’s staff and State Representative Jeff Weninger. The AzBA was also highly involved in shepherding the bill through the legislative process and to the governor for signature.

Our partners at CCG have team members throughout the United States, Europe and Asia. They advise banks on fintech related to partnering, investing and acquiring. The firm works with various accelerators and incubator programs.

Since then, Wyoming, Utah, Nevada, and Florida have also enacted versions of fintech sandboxes. Oklahoma and South Carolina currently have pending legislation to create sandboxes. And Georgia and North Carolina are also looking at creating them in their states. What appears to differentiate Arizona’s program from these other states is that Arizona does not restrict participation to Arizona businesses. This lack of a domicile requirement is what we think will attract more fintech companies from all over the country and the world to Arizona than these other states.


The Arizona Fintech Council program participants will necessarily fall into one of three groups: the fintech companies seeking a partnership with one or more financial institutions (FIs) to do a Proof of Concept (POC) and apply to the Arizona Attorney General’s Fintech Sandbox; the FIs seeking to evaluate those fintech companies; and the public policy stakeholder groups seeking to make the state’s sandbox program successful. More on them below.

Our partners at CCG have team members throughout the United States, Europe and Asia. They advise banks on fintech related to partnering, investing and acquiring. The firm works with various accelerators and incubator programs. They speak at banking and fintech conferences around the world that attract companies seeking to test fintech products and services in major markets. These fintech companies are looking for FIs that are already integrated into the regulatory regimes of their operating jurisdictions for working partnerships in order to deploy their wares, seek investment, and potentially be acquired by FIs with the economic scale to distribute their products and services.

The partnership will rely on CCG to identify the relevant fintech companies, analyze their products and services and business plans — and qualify them to present to the Council before applying for admission to the Arizona Fintech Sandbox. AzBA staff will work with the CCG team to promote membership in the Council to FIs in Arizona and throughout the country. Ideally, the Council will be populated by subject matter experts from the member FIs seeking to evaluate the fintech companies’ products and services and potentially partner with these companies in the Sandbox and possibly invest in or acquire them.

The third group of participants may constitute subject matter experts from the public policy stakeholder groups seeking to make the Arizona Fintech Sandbox program successful. These include members of the economic development community, relevant trade associations, chambers of commerce, government, and universities throughout the state.

AzBA has initially identified the following groups to approach and gauge their interest in participating in the Council: The Greater Phoenix Economic Council (GPEC); Sun Corridor, Inc. (which is the corollary to GPEC in southern Arizona); the Arizona Commerce Authority (ACA); the Arizona Technology Council; ASU’s innovation center known as SkySong; The University of Arizona’s Center for Innovation; the economic development director of the City of Phoenix; and the Arizona, Phoenix, and Tucson Chambers of Commerce.

Program Design

As currently conceptualized, we anticipate the Arizona Fintech Council hosting three or four day-long meetings annually where each fintech company will have 60 minutes to showcase and Q&A their concept, solution and services. They will present their plans for utilizing the Arizona Fintech Sandbox. And they will make their case for a POC partnership with one or more of the financial institutions participating in the Council.

The CCG staff will produce a background memorandum on each fintech company scheduled to make a presentation to the Council. These memoranda will provide basic information on the companies and the product or service they intend to test in the sandbox. The memos will be distributed to the members of the Council in advance of each meeting.

The presentations will be at a high-altitude, summary level designed to gauge the interest of the individual councilmember FIs in potential POC partnerships with the presenting fintech companies. These initial presentations will not be at a depth-of-information level that will restrict the council member or the fintech from fully participating in the initial introductory presentation.


The subject matter experts from the participating FIs will view the presentations and fill out a standard evaluation form with their impressions. They may also make suggestions and recommendations for a successful sandbox POC and entry into the regulated market. The Council will collect the evaluation forms and provide the fintech applicants with a copy. If the consensus view of the Council is that the fintech company has a concept, solution or service that supports the financial services sector, and there are one or more member FIs interested in partnering with the fintech in a POC, the Council will forward an evaluation summary with a cover letter expressing that view to the Attorney General’s Fintech Sandbox staff.

The Council will facilitate contact between members of the Council and the fintech companies following each Council meeting to the degree requested and welcomed by all parties — and warranted by the potential success of a POC. If a councilmember is interested in partnering with one or more of the fintech presenters, that member will have 30 days to notify CCG of that interest. The parties then will negotiate in good faith a standard POC agreement that will have the terms of the POC — and all related terms to protect all parties, including the intellectual property of the fintech.

Eligibility for Participation and Membership Fees

The goal is to have a Council with approximately 30 people viewing the presentations of the Arizona Fintech Sandbox applicants at any given meeting. They will come from regulated U.S. FIs and stakeholder public policy groups from inside and outside of Arizona.

To Participate as a Financial Institution (FI)
The goal here is to have a diverse membership from an institution-size perspective. Most industry experts break the U.S. financial services sector into three groups based on asset size: the large “money-center” banks with assets over $1 trillion; the regionals and super-regionals with assets between $10 billion and $1 trillion; and the community banks, Community Development Financial Institutions, and credit unions with assets below $10 billion. The Arizona Bankers Association has member banks in all three categories.

In the initial phase of the Council’s operation, we will endeavor to have representatives from institutions in all three size categories participate. We will not charge a participation fee for AzBA-member banks in the first year. We will, however, analyze the wisdom and necessity of assessing member banks a participation fee in subsequent years. That fee, however, will be substantially lower than the fee for non-member financial institutions, which will be $10,000 for the first year.

To Participate as a Fintech Company/AZ Sandbox Applicant
Fintech companies seeking to present their concept and make connections with members of the Council must have an application pending or a demonstrated intention to submit an application to the Arizona Fintech Sandbox. There will be a nominal “presentation fee” of $1,500 to present to the Council. That presentation fee will not include any fees that the State of Arizona may charge the fintech to participate in the Arizona Fintech Sandbox. The fee will, however, entitle the fintech company to one annual associate membership in the AzBA, which includes access to the annual convention (not including the convention fee and lodging costs).

To Participate as a Stakeholder Group
Stakeholder groups wishing to participate must have an obvious “stake” in a successful Arizona Fintech Sandbox program. As mentioned, these organizations include, among others, the state’s economic development corporations such as the Greater Phoenix Economic Council (GPEC), the Sun Corridor, Inc., the Arizona Commerce Authority (ACA), the Arizona Technology Council, and the state’s largest chambers of commerce (the Phoenix Chamber, the Arizona Chamber, and the Tucson Chamber).

Eligible stakeholder groups can also include high-tech university incubators such as the University of Arizona’s Center for Innovation and Arizona State University’s SkySong. They can also include state and local government officials such as city economic development personnel, state legislators, and senior members of the governor’s staff. These participants must be invited to participate, and the participation fee will be $500 per meeting, per person attending.

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