The Financial Conduct Authority’s sandbox unit, designed to help firms test potential robo-advice offerings and “innovative products”, opened for business yesterday (9 May).
The regulatory sandbox is now open for applications, with firms given until 8 July to apply for inclusion in the first cohort of providers and developers.
According to the City watchdog, it is a ‘safe space’ in which businesses can test innovative products, services, business models and delivery mechanisms, while ensuring that consumers are appropriately protected.
The launch of the unit followed comments from Harriet Baldwin, the economic secretary to HM Treasury, about the regulator making it difficult for financial services firms to innovate.
It forms part of Project Innovate, an initiative kicked off in October 2014 to encourage innovation in the interests of consumers and promote competition through disruption.
The sandbox will offer a range of options for eligible firms: a tailored authorisation process (restricted authorisation) for new firms in the testing phase; individual guidance for firms testing ideas that do not easily fit into the existing regulatory framework; and in some cases waivers or no enforcement action letters.
Tracey McDermott, acting chief executive at the FCA, said: “Our aspiration is that the sandbox not only enables innovative ideas to be tested and brought to market, but also helps to reduce the time and the cost of getting them there.”
Back in November, the FCA’s competition and strategy division head Bob Ferguson said from a legal point of view, the sandbox had been very tricky to set up.
Addressing questions over the potential for mis-selling, he said success really depends on what comes through, but each experiment would have a clearly defined beginning, middle and end evaluation process.
“I don’t see it as being a space where consumers are led naked into an arena and wild animals are set on them,” stated Mr Ferguson. “There will be suitable consumer safeguards built in.”