The regulatory sandbox allows businesses to test innovative propositions in the market with real consumers.
We have accepted 13 firms into cohort 7 of the regulatory sandbox. Later in summer 2021 we will be moving to ‘Always Open’, making the regulatory sandbox available throughout the year.
We are committed to supporting innovation within financial services and we believe innovation has an important role to play in meeting the challenges following coronavirus. We continue to support innovative firms who wish to deliver consumer benefit and test their propositions in the market with real consumers.
The regulatory sandbox is open to all types of propositions and welcome applications from all sectors of the financial services market. We are particularly interested in firms who want to help people and the financial systems they rely on deal with the effects of the coronavirus outbreak.
For cohort 7 we wanted to see more innovation and testing from firms developing businesses, products or services intended to:
- detect and prevent fraud and scams
- support the financial resilience of vulnerable consumers
- improve access to finance for small and medium sized enterprises
We were not limited to the above and will consider proposals intended to help with the consequences of coronavirus, and indeed any innovative financial services ventures.
These propositions must be genuinely innovative, show clear consumer benefit and meet all of our eligibility criteria as set out below.
Eligibility criteria
The application form includes space for you to explain how your proposition meets our eligibility criteria. The table below includes information on each criteria:
| Criteria | Key questions | Positive indicators | Negative indicators |
|---|---|---|---|
| In scope | Are you looking to deliver innovation that is either regulated business or supports regulated business in the UK financial services market? |
Innovation appears to be intended for the UK market
|
Innovation does not appear to be intended for use in the UK
|
| Genuine innovation | Is your innovation new or a significantly different offering in the marketplace? |
Desk research produces few or no comparable offerings already established on the market Step-change in scale |
There are numerous examples of similar offerings already established on the market It looks like artificial product differentiation |
| Consumer benefit | Does the innovation offer a good prospect of identifiable benefit to consumers (either directly or via heightened competition)? |
The innovation is likely to lead to a better deal for consumers directly or indirectly You have identified any possible consumer risks and proposed mitigation The innovation will promote effective competition |
Likely detrimental impact on consumers, markets or the financial system It looks designed to circumvent regulations |
| Need for a sandbox | Do you have a genuine need to test the innovation in our sandbox? Applicants aren't required to need a sandbox tool to meet this criteria |
The innovation does not easily fit the existing regulatory framework, making it difficult or costly to get the innovation to market You will benefit from using a sandbox tool to test in a live environment You have no alternative means of engaging with the FCA or achieving the testing objective The full authorisation process would be too costly/difficult for a short viability test |
Live testing is not necessary to answer the question that you want answered (to achieve the testing objective) You are able to undertake the test easily without the support of the FCA A dedicated supervisor or our Direct Support team could answer the query |
| Ready for testing | Are you ready to test the innovation in the real market with real consumers? |
You have a well-developed testing plan with clear objectives, parameters and success criteria Some testing has been conducted to date You have the resources to test in the sandbox You have sufficient safeguards in place to protect consumers and is able to provide appropriate redress if required |
Unclear objectives for testing and/or plans for testing are underdeveloped Little to no testing has been done You do not have the resources for the test The proposed customer safeguards are inadequate and/or appropriate redress cannot be provided |
Securing partners
A number of the firms require a partner in order to test their proposition (e.g. you are a technology provider for a regulated firm).
If you need a partner, you must find and secure contractual agreements before testing.
We are not able to provide a partner if you need one.
Requirement to have a significant UK presence
If your test requires you to be authorised or registered by us, you would be required to have a certain level of staff presence and a head office located in the UK.
Bank accounts
Many firms need a UK bank account to be able to carry out testing.
Regulated activities and restricted authorisation
If you require a restricted authorisation, you will need to submit a number of forms as part of your application.
We will guide you through the process of authorisation, however we recommend you read our authorisation pages to familiarise yourself with the process and the documentation that will be required.
Some key documents to read are:
- PERG 2.7 in our Handbook provides a broad outline of the activities the FCA regulates – you will need to work out which regulated activities you may be carrying out during your sandbox test
- our Threshold Conditions, which firms must meet to be authorised
- our guides to applying to be a payment institution and applying to be an electronic money institution (pay particular attention to the safeguarding requirements)
This restricted authorisation option is not available to firms looking for a banking license – or an insurer license - contact us and Prudential Regulation Authority's joint New Bank Start-up Unit or or New Insurer Start-up Unit.