Innovation

The Innovation Testing Licence (ITL) Programme is the DFSA’s version of a regulatory sandbox. It provides a controlled environment within which ITL holders can test and develop their innovative products and services. As it is a licenced-sandbox, applicants must apply to the DFSA and complete an authorisation process. The first stage of the process involves submitting an application for consideration. The second stage involves submitting an application for a DFSA Authorisation to operate within the ITL Programme.

Licences under the ITL Programme typically work in the following way:

• Applicants are required to develop a Test Plan for the business model, products or services they are seeking to test. The test must be technology-related and not, for example, to explore customer interest in their products or services. 
• Eligible applicants may receive a temporary relaxation of a limited set of regulatory requirements, but this will cease once the applicant completes the ITL testing period. 
• Eligible applicants will be allowed to test for a specific period (typically 12 months) but subject to certain restrictions on their activities. e.g. limited clients and transaction volume and values
• Upon the completion of the 12-month testing period, the ITL holder must either apply to withdraw its ITL or apply to exit the ITL Programme, thereby removing all ITL Rule waivers, modifications and restrictions. 
• In order to exit the ITL Programme, the ITL holder will be required to demonstrate that it meets all regulatory requirements and is prepared to operate as a regulatory compliant Authorised Firm. If an ITL holder fails to demonstrate sufficient compliance, it must withdraw its ITL.  
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To be eligible for the ITL Programme, an applicant and its business must meet the criteria set out in paragraph 4 of GEN chapter 13 “Guidance on Facilitating Fintech Innovation”.

• it must involve the use of innovative Fintech, by offering a new type of product or service or applying innovative Fintech to an existing product or service;
• it must involve an activity that, if carried on in or from the DIFCG , is a Financial ServiceG (i.e. it is within the scope of the activities that the DFSA regulates);
• the applicant must be ready to start live-testing of its business with customers; and
• the applicant must intend to roll-out its Fintech business on a broader scale in or from the DIFC onceG it has successfully completed testing.

In assessing if a business activity involves innovative Fintech, the DFSA will consider if the product or service uses new or emerging technology or uses technology in an innovative way and also if it addresses a problem or brings potential benefits to consumers or industry. That is, the Fintech Operator must be able to demonstrate that the business uses innovative Fintech. (See GEN 13)

The DFSA will also assess the stage of development of the product or service to check that it is ready to start-live testing with customers. If a proposal is only at a conceptual stage and not yet ready to start testing, then it is unlikely a Licence will be required as no Financial Service is being carried on. By contrast, if the business is already fully operational and it has the appropriate regulatory compliance infrastructure, then the applicant should consider applying for a Licence under the conventional application processes (and not in accordance with this Guidance).

Fill in the Cohort Application to apply. This is a short document that is meant to provide us with an overarching view of your business model and intended financial products and services. If you are accepted into a Cohort, it means we consider you as being likely to meet the ITL eligibility criteria. Once in a Cohort, we will host a session explaining our approach to regulation and explaining the ITL Programme in more detail after which you will be given 6 weeks to consider and complete the ITL Application in full. This will require commitment from you and we are available throughout the process to answer questions and provide more information.

• See below for a detailed timeline. 
• To see an example of the Cohort application, click here.
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The DFSA runs the ITL Programme once a year. An Applicant wishing to apply for an ITL must first apply online to be accepted into th cohort.

For further information, please see the ITL FAQs and an example of the Cohort application and the ITL application. While the Cohort application is live, it can be accessed here. Inquiries about the ITL should be sent to [email protected]