Since its inception, the Financial Conduct Authority (FCA)’s regulatory sandbox has continued to draw in innovative firms keen to test their business models, products and services in the market. But how has the experience of firms who have been through the sandbox journey been?

In collaboration with Innovate Finance, the FinTech team in Deloitte’s EMEA Centre for Regulatory Strategy have interviewed several firms across the spectrum of the first four sandbox intakes to seek their views on their sandbox journeys.

Added value for business models and credibility
Overall, it is very clear that the FCA sandbox has delivered real value to firms. In particular, being accepted into the sandbox and proving the underlying technology in a live environment has helped firms to better understand and fine tune their business models. Many also believe that the sandbox journey increased their credibility with both investors and customers.

Improvements for Sandbox
When asked how the FCA sandbox could evolve further, firms highlighted a number of areas for potential improvement or development.

• Navigation of rules – An easier way to navigate the FCA handbook was a recurring point of feedback. In particular, several firms suggested that the FCA could develop a “Financial Regulation 101” starter-pack for firms and people with limited financial services sector experience, as well as more guidance on the FCA’s expectation in relation to the sandbox application forms. Some firms also thought that the FCA could consider extending the time firms are allowed to stay in the sandbox, or starting the “timer” after the necessary authorisations have been obtained.
• Facilitating cohort interaction – Many firms also felt that the FCA could do more to facilitate the creation of a network, or “cohort feel”, amongst the firms accepted into the regulatory sandbox, especially those participating in the same cohort. While a number of issues may be too confidential to share, several firms would have welcomed the opportunity to discuss broader challenges and approaches with their peers, enabling them to learn from each other.
• Sharing lessons learned – Another view was that the FCA should share the lessons learned in the sandbox with the wider industry. Sharing the guidance (in anonymised form) given to the firms in the sandbox more publicly and transparently would also help alleviate the risk which we flagged earlier in this article: that the sandbox could be seen to provide, albeit unintentionally, a certain competitive advantage to the firms that are allowed to participate in it.
• Global reach – Firms with international operations or ambitions were very supportive of the FCA’s proposals for a global regulatory sandbox and regulatory network. However, as one firm remarked, in order to be truly effective, a global sandbox would need a very clear structure, including a single application process and, in all likelihood, a central team to manage co-ordination with firms and regulators. Nevertheless, a global sandbox should facilitate cross jurisdictional referral systems, promote regulatory convergence, and help firms understand the regulatory environment in selected key markets.

The full report can be downloaded here.

This is brought to you as a courtesy of the Altfinator project in which PEDAL is a partner.