The sandbox allows firms to test innovative products, services or business models in a live market environment, while ensuring that appropriate protections are in place. It is part of Innovate, an initiative kicked off in 2014 to promote competition in the interest of consumers. The sandbox was a first for regulators worldwide, underlining the FCA’s commitment to innovation in financial services.
Christopher Woolard, executive director of strategy and competition at the FCA, said:
'Since we first opened the sandbox, it has supported almost 70 firms in testing innovative new products and services. It is particularly encouraging that we are now seeing more applicants from outside London and a broader range of firms testing in the sandbox. As we open the application window for our next sandbox cohort, we continue to encourage applications from firms of all sizes and from a wide range of sectors, including sectors we haven’t seen heavily represented in the sandbox to date.'
The FCA received 61 submissions for the third phase of the regulatory sandbox. 18 applications met the sandbox eligibility criteria and were accepted to develop towards testing.
We continue to see successful sandbox applications from a diverse range of sectors, locations and firm size. Accepted propositions cover a range of areas including blockchain based payment services, RegTech propositions, general insurance, AML controls, and biometric digital ID and Know Your Customer (KYC) verification.
In the sandbox’s first phase, a majority of the firms were London-based with only a few from other parts of the UK. As the FCA continues to increase its regional engagement in emerging FinTech hubs, encouragingly, the proportion of regional firms has increased in each subsequent cohort. Over 40% of firms invited to test in cohort 3 are based outside London, compared to 35% in cohort 2 and 25% in cohort 1.
The current cohort consists of the firms listed below. Tests will be conducted on a short-term and small-scale basis and the FCA has worked with the sandbox firms to agree testing parameters, building in consumer safeguards.
Cohort 3 firms
Regtech proposition which tracks updates to regulations within the FCA Handbook and aligns their implementation to Barclays’ internal policies.
International money transfer platform that enables customers to send healthcare services along with their remittances.
DLT-based cross-border money remittance system that incorporates a transaction monitoring system which is powered by a virtual, artificial-intelligence compliance bot to tackle money laundering, terrorism financing, and fraud more efficiently.
New consumer payment network designed around open banking APIs, which works via @usernames and direct bank transfers.
Economic Data Sciences
Technology solution that utilises artificial intelligence to provide fund managers with a mathematically-defined optimal trade-off among a number of risks and objectives during the investment selection process.
Uses smart-contracts on a blockchain to provide fully-automated decentralised flight insurance.
first direct and Bud
App which learns customers attributes from transactional and demographic data to identify financial and non-financial products from a marketplace of first direct, HSBC and external institutions.
Transaction monitoring system that monitors the movement of money through the economy by tagging individual units of value in transaction amounts and facilitates the sharing of anonymised information between parties in order to help prevent financial crime.
Automated solution providing digital savings guidance and investment advice.
P2P investment aggregation platform that facilitates investment in a diversified portfolio of P2P loans.
Platform that consolidates business bank accounts into one login. Using predictive algorithms, reBank offers businesses the potential to improve the efficiency of their banking tasks and business payments.
New electronic platform that enables end-to-end automation of price discovery, execution and life-cycle management of structured products using centralised or blockchain asset custody.
Sherpa Management Services
Insurance solution that offers members one account to set-up and manage multiple insurance risks. Sherpa offer dynamic products which provide the ability to increase and decrease the sum assured as needs change.
Blockchain based payments platform that uses cryptocurrencies to facilitate money remittance at a faster speed and with lower transaction costs.
Spherical Defence Labs
Application Programming Interface (API) security system that detects advanced hacks and breaches in banks powered by deep learning and computational linguistics.
New auction method of book-building for initial public offerings/private placements that aims to be fairer and more transparent than existing methodologies.
Usage-based contents insurance product with innovative risk scoring method.
Technology provider that lets users create an encrypted, biometric digital identity linked to their government issued ID. Yoti lets users of the app actively consent to share their verified identity details with financial institutions for use in KYC verification.
Application window for sandbox cohort 4
We are now accepting applications from firms to be part of our fourth sandbox phase. Firms have until 31 January 2018 to submit their applications. The eligibility criteria, application form and instructions on how to apply are available on the FCA website. The FCA would expect all accepted firms to be ready to begin testing from June 2018.
The FCA encourages applications from firms of all sizes. As seen by the firms accepted into the existing three cohorts, the sandbox is available to large firms, start-ups and everything in between.
Notes to editors
- Find out more about the Regulatory Sandbox.
- Regulatory Sandbox Lessons Learned Report.
- On 1 April 2013, the FCA became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
- The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
- Find out more information about the FCA.
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