Beyond the Sandbox: Rethinking Fintech Regulatory Innovation in Kuwait through Comparative Analysis

Abstract

This paper examines Kuwait’s fintech regulatory challenges through a comparative analysis of global regulatory models, with particular focus on the effectiveness of regulatory sandboxes versus innovation hubs. Drawing on theoretical frameworks including Disruptive Innovation Theory and Public Interest Theory, the study analyses regulatory approaches in the United Kingdom and Saudi Arabia to identify lessons for Kuwait’s fintech sector development. The research reveals that whilst regulatory sandboxes have gained global popularity as innovation facilitation mechanisms, empirical evidence suggests innovation hubs may provide superior developmental benefits when implemented as part of a comprehensive regulatory strategy. The paper identifies four fundamental problems constraining Kuwait’s fintech sector: regulatory constraints and compliance challenges, absence of dedicated regulatory frameworks, inadequate provisions for balancing innovation with financial stability, and insufficient cybersecurity and data privacy protections. Through critical evaluation of international best practices, the study argues that Kuwait’s regulatory development should prioritise establishing a comprehensive innovation hub as the foundation of a broader regulatory ecosystem that could also incorporate sandbox elements. The findings suggest that effective fintech regulation requires adaptive governance frameworks capable of matching technological innovation speed whilst maintaining essential consumer protections and financial stability measures.