Regulatory ‘sandbox’ will boost innovation says FCA
UK regulator the Financial Conduct Authority is planning to launch a ‘regulatory sandbox’ that will allow businesses to test out new products and services without ‘incurring the normal regulatory consequences’. The move is part of the FCA’s year-old Project Innovate, which aims to boost competition and growth in financial services.
Under the plans, firms that don’t have an FCA licence will be able to test their products and services in the regulatory sandbox ahead of launch; the goal is to help banks and other financial service providers reduce the time it takes to bring innovative ideas to the market. The FCA says that the sandbox should lead to better services for customers, including an increased range of products and services.
The FCA hopes that it will also help to bring innovators and regulators together, to ensure that consumer protection would be built into new products and services before they reach a mass market.
“To promote competition it is vital that we support firms – both regulated and unregulated, whether large incumbent or small start-ups – that want to bring new ideas that can benefit consumers to market,” said Christopher Woolard, director of strategy and competition at the FCA. “In just one year, Project Innovate has helped more than 175 innovative businesses and undertaken a number of steps to address some of the challenges that firms face. To build on this work, today we’ve set out our plans to help firms test new ideas to better understand how they may work in practice.”
Project Innovate was set up a year ago to boost innovation in financial services. Five of the businesses that were part of the project have been granted authorisation by the FCA to begin trading. The FCA was asked to investigate the feasibility and practicalities of developing a regulatory sandbox for financial services by the UK Treasury, following recommendations by the Government Office for Science.
Apart from the sandbox, the FCA has suggested a number of additional solutions open to the industry acting collectively, such as establishing a virtual testing environment and setting up an authorised umbrella company that allows innovative businesses to act as its ‘appointed representatives’ for the duration of the trial. The FCA says it plans to explore these plans further and will do so after discussing it with stakeholders.
The sandbox will be open to proposals for testing in spring 2016.