Effectiveness of Regulatory Sandboxes in Financial Services: A Systematic Review

Abstract

Regulatory sandboxes have become increasingly prevalent over the past decade. In this paper we systematically review 15 peer-reviewed studies and 5 gray literature sources (2016–2025) identified through structured searches of Scopus, Web of Science, and regulatory repositories. Treating effectiveness as contested and multidimensional, we combine existing studies to demonstrate when, how, and for whom sandboxes generate benefits and risks. Three patterns emerge. First, the clearest gains are ecosystem spillovers: once a sector has its first sandbox entrant, funding for non-participating firms often rises, consistent with signaling and information diffusion. Second, direct firm-level funding advantages largely fade after accounting for staggered adoption, with positive effects concentrated in smaller firms. Third, system-level impacts depend on context, varying with supervisory capacity, complementary policies, and wider pro-innovation reform bundles. Overall, the evidence base is small, UK-centric, and methodologically heterogeneous, so findings should be read as indicative. We conclude with evaluation implications for regulators.