The Financial Conduct Authority has made its regulatory sandbox available for applications throughout the year.
The regulatory sandbox, which provides access to regulatory expertise and a set of tools to facilitate pre-launch testing, previously operated on a cohort basis, meaning firms could only apply during specific windows in the calendar year.
However, the new version will be open for year-round applications.
The FCA said: “While the cohort approach was appropriate for a testing environment, which served as a blueprint for regulators all over the world, the sandbox required changes to reflect its maturity and the lessons learned since its inception in 2016.
“The Kalifa Review of UK FinTech recommended that the sandbox be enhanced to provide more value to firms. This included a specific recommendation that the sandbox be made available on a rolling basis, rather than through time-limited windows.
“In August 2021, the regulatory sandbox moved to always open, allowing firms to submit their applications throughout the year.”
The sandbox is for authorised firms, unauthorised firms that require authorisation, and technology businesses that are looking to deliver innovation in the UK financial services market.
It looks to provide firms with the ability to test products and services in a controlled environment, reduced time-to-market at potentially lower cost, support in identifying appropriate consumer protection safeguards to build into new products and services, and better access to finance.
In an application guide published yesterday (August 2), the FCA said sandbox tests are expected to have a clear objective such as reducing costs to consumers and to be conducted on a small scale.
The FCA said the applicant's innovation proposal should be intended for the UK market and there should be few or no comparable offerings established in the market.
It added the firm’s innovation proposal should constitute a genuinely innovative technology, approach, product, service or model and should be related to a theme of particular focus for the FCA.
Another thing the regulator is looking for is that the firm’s innovation should lead to a better outcome for consumers directly or indirectly - for example, through lower costs and promoting effective competition.
Separately, the FCA also placed an increased focus on diversity and inclusion, stating the firm applying should promote this or seek to address issues of diversity and inclusion in financial services.
The FCA said it considers diversity and inclusion to be regulatory issues, and this extends to the support it offers in the sandbox.
“Diversity of experience, thought, and participation at senior levels leads to well-rounded decision making, enabling firms to better meet the needs of all consumers,” it said.
“We consider diversity important to the health of the FinTech ecosystem, and we welcome applications from underrepresented groups (including female and minority-led firms).
“We have an interest in understanding the extent to which sandbox applicants have implemented working practices aimed to promote diversity and inclusion. We encourage applicants to share details of any policy documents outlining their approach to these topics.
“To gauge the balance of representation in senior leadership, we are taking a holistic approach by requesting data covering the protected characteristics of gender, race, sexuality, religion, age and disability, whilst also seeking insight into the social backgrounds of senior leaders in FinTech.”
The regulator said it understands that some firms may not already capture all of the requested information, so urges firms to answer the questions to the extent that they are able.
Last month, the FCA, Prudential Regulation Authority and Bank of England came together to set out plans to improve diversity and inclusion in financial services.
In a discussion paper, the regulators set out policy options to engage with firms and stakeholders on how the industry can accelerate the pace of change on diversity and inclusion.
Towards the end of the month, the FCA also proposed changes to its listing rules as a way of improving transparency on the diversity of listed company boards and their executive management teams.
The regulator is consulting on rules to require companies to disclose annually on a comply or explain basis whether they meet specific board diversity targets and to publish diversity data on their boards and executive management.
sonia.rach@ft.com
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