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Programme

FCA Regulatory Sandbox

Infrastructure

Impact for scaleups

58

applications and 13 businesses selected for Sandbox Cohort 7

140

Firms tested in first six cohorts

28

Firms selected for digital sandbox pilot from 94 applications

84%

Percentage of firms reporting digital sandbox had accelerated their product development

31

Regulatory sandboxes operating globally on FCA model

Key sectors

Finance

Launched in 2016 The Financial Conduct Authority’s Regulatory Sandbox provides an environment for firms to test innovative products and services in the real market with real customers. Its model is now being replicated internationally, including in Africa, East Asia and the Pacific region.

The seventh cohort of businesses has now been selected with applications coming from both the UK and overseas. Most applications for this cohort came from firms in the retail investments and retail lending sectors. In the wider context of coronavirus, the FCA refocused the approach seeking applicants developing businesses, products or services intended to detect fraud and scams, support the financial resilience of vulnerable consumers or improve access to finance for general SMEs.

In the past year the FCA has carried out a digital sandbox pilot in collaboration with the City of London Corporation. Ongoing evaluation and feedback from participants have indicated a range of benefits. These include accelerated product development, validating and improving AI and machine learning models, refining business plans, and networking within the pilot ecosystem. More than eight out of ten participants reported that access to the sandbox had accelerated their product development, with an average estimated gain being between 18-24 months.

Participants often found that they derived other benefits particularly through collaboration with other teams and expert mentors. These included pivoting business models or better customer understanding and product design. A second cohort of the digital sandbox will be running at the end of 2021; this will be focused on the theme of sustainability/climate change to support the UK’s green finance ambitions.

In 2019 the Global Financial Innovation Network (GFIN) was launched, chaired by the FCA it brings together over 70 international organisations committed to supporting financial innovation in the interests of consumers. Members include the Australian Securities and Investments Commission, the USA’s Consumer Financial Protection Bureau and Hong Kong Securities and Futures Commission. Building on the model developed by the FCA Sandbox it has developed a cross-border testing environment for scaleups.

Last year the GFIN invited applications from firms to test innovative financial products, services or business models across more than one country or jurisdiction. The GFIN received 38 applications across the 23 participating regulators from across five continents. Most applicants operate in the RegTech, payments and Wholesale financial markets sector. To date two businesses both operating outside the UK have been selected and have begun testing their propositions. The GFIN will make further announcements when the cross-border testing programme is open for new applications in the future. 

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

                       

FCA Regulatory Sandbox website