UK regulatory sandbox’s second cohort announced
The UK Financial Conduct Authority (FCA) has provided an update on its regulatory sandbox and unveiled the list of firms that were successful in their applications to begin testing in the second cohort of the sandbox. The regulatory sandbox allows businesses to test innovative products, services, business models and delivery mechanisms in a live environment. It is part of Project Innovate, an initiative begun in 2014 to coordinate the FCA’s approach to FinTech.
The FCA received 77 submissions for the second phase of the regulatory sandbox, more than applied for cohort one. 31 applications met the sandbox eligibility criteria and were accepted to develop towards testing. 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. The range of firms testing in the second cohort is diverse, covering a variety of places in the UK and sectors including wholesale, general insurance, payments, retail banking and retail lending. Accepted propositions from firms cover a range of ideas including distributed ledger technology based payment services and artificial intelligence software to observe client behaviour and better determine client preferences before financial advice is given.
In cohort one of the sandbox, 24 firms were accepted out of 69 applications and 18 firms had testing plans approved in October 2016. The six month testing window has now closed and firms are submitting final reports, which will be reviewed before the firms transition out of the sandbox. The FCA is also now accepting applications from firms to be part of its third sandbox phase via its application page. Firms have until 31 July 2017 to submit their applications. The FCA would expect all accepted firms to be ready to begin testing from November 2017. The FCA encourages applications from firms of all sizes.