The Financial Conduct Authority’s Sandbox launched in June 2016 provides an environment for firms to test innovative products and services in the real market with real customers and its model is now being replicated internationally.

Located at the FCA’s London headquarters, the Sandbox has now run five cohorts supporting 118 firms either based in the UK or intending to operate within the UK’s financial services market. To qualify firms must be looking to deliver innovation that is either regulated or supports regulated business, have benefits to consumers and be test ready.

The programme includes the opportunity to test developed technologies as well assess commercial viability and pricing strategy. Companies receive support to reshape their business models in response to the testing. Sandbox is also facilitating corporate collaboration between new market entrants and large corporates such as HSBC and First Direct.

Early evaluation is demonstrating the potential of the programme with nine out of ten firms that completed tests continuing to progress to a market launch and the cohort receiving £135 million in equity funding. Overall around 80% of firms that successfully applied for the programme are still operating while the figure for those that applied but were not successful is 57%.

Most participating businesses have a retail finance background with others in general insurance, pensions and lending. The FCA is now seeing increasing numbers of applications coming from regions of the UK wider than London although there is still limited involvement from female founders.

The FCA’s approach has been widely emulated. There are at least 31 operational regulatory sandboxes globally with 28 innovation hubs in the EU. In January 2019 the FCA launched the Global Financial Innovation Network to provide a more efficient way for innovative firms to interact with regulators, helping them navigate between countries as they look to scale new ideas.

The support from the Innovate Team at the FCA was instrumental in the success of this journey.
Myles Milston, CEO of Globacap

FCA Regulatory Sandbox: World-leading programme breaking down regulatory barriers [Annual Review 2020] website