Financial Conduct Authority  

FCA digital sandbox launches with 30 firms

FCA digital sandbox launches with 30 firms

The City watchdog has launched its digital sandbox, accepting 30 firms to develop innovative products and services in response to the Covid-19 pandemic.

Launched today (November 23), the Financial Conduct Authority’s digital sandbox will provide support to firms looking to tackle fraud and scams, vulnerability and lending to small and medium-sized businesses.

It said it had received 94 applications across the three categories, but the successful applicants had “genuine innovation”, required use of the sandbox and had defined objectives with a pathway to production.

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The pilot of the digital sandbox, which was accelerated in May against the backdrop of the coronavirus crisis, will run until early February.

It is the first ‘digital sandbox’ to be created by the FCA, while applications to the seventh cohort of the watchdog’s ‘regulatory sandbox’ are currently open.

The ‘digital’ sandbox will have a strong focus on creating a digital testing environment for products and services which are at an early stage of development.

It will provide firms with access to synthetic data assets to enable testing, an application programming interface marketplace, an integrated development environment for testing and an “ecosystem of key organisations” for support and input.

According to the regulator, the pilot will be assessed by independent evaluator, Grant Thornton, against five success criteria: innovation, speed, collaboration, pilot features and sustainable future.

The FCA’s sandbox allows firms to test products and services in a controlled environment and on a small scale, with the process being overseen by the watchdog.

In October, the regulator announced its new sandboxes would have a particular focus on supporting new products and services which could help consumers and firms tackle challenges compounded by the pandemic.

In terms of fraud and scams, the FCA is looking for solutions to help firms use data analytics to analyse and detect fraudulent activity and share this data between a network of relevant bodies.

The regulator is also looking for ways to enable technology to detect patterns or indicators of consumer behaviour which may indicate a scam is taking place.

Vulnerable customers are also high on the agenda. Some firms accepted into the digital sandbox are looking at how advanced analytics can be better deployed to identify and manage the risk that a customer may be in a vulnerable state, or how technology could provide debt management advice to consumers.

Other sandbox firms are focusing on SME lending, including how data science could be used to improve modelling, risk assessment and credit scoring of small and medium size businesses.

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