Building on their approach to innovation, the FCA are collaborating with The City of London Corporation to pilot a ‘digital sandbox’. This new service will provide enhanced support to innovative firms tackling challenges caused by the coronavirus (Covid-19) pandemic. Applications to the digital sandbox will open later in the summer.
Digital sandbox explained
The FCA’s experiences and engagement indicate that developing a permanent digital testing environment would provide significant value to financial services.
Data has become increasingly pivotal to the way firms operate and engage with each other and the consumers they serve. This means that longstanding challenges like data access and standardisation are increasingly a barrier for market participants and innovators. The FCA also receive requests for support from firms which don’t match the eligibility criteria of the regulatory sandbox.
The FCA recognise the following features as the foundations of a digital sandbox:
- Access to high-quality data assets including synthetic or anonymised data sets to enable testing and validation of technology solutions.
- Regulatory call-to-action – as with the FCA’s latest sandbox cohort, they will identify areas of regulatory interest where they would like to see innovation play a greater role, or issue specific challenges.
- A collaboration platform – to facilitate diversity of thinking, share learnings and foster an ecosystem around solving complex industry wide challenges.
- An observation deck – to enable regulators and other interested parties to observe in-flight testing at a technical level, to inform policy thinking in a safeguarded environment.
- Application programming interface (API) or vendor market place – where FinTech, RegTech and other vendors can list their solutions and APIs, to encourage greater interoperability and foster a thriving ecosystem.
- Access to regulatory support – such as development of testing plans, signposting to relevant regulations, informal steers or support to understand the wider regulatory environment or the authorisation process.
The FCA will pilot these features and tools to support innovative firms and will evaluate the effectiveness of each feature or tool as the pilot progresses.
The FCA will provide support to innovative firms and organisations looking to tackle challenges relating to, or exacerbated by, coronavirus. For the pilot, they have taken the decision to focus on 3 pressing areas so that we can provide the necessary support for each, in terms of supplying relevant data sets and expertise.
The pilot will support firms and organisations looking to:
- detect and prevent fraud and scams
- support the financial resilience of vulnerable consumers
- improve access to finance for small and medium sized enterprises
They will publish detailed use cases on these 3 focus areas before opening the application process.
Pilot next steps
The FCA will publish further information including how to apply to the digital sandbox and the specific use cases later in the summer.