Global sandbox

Innovation is an important means of delivering competition in the interest of consumers. We and other regulators in some other jurisdictions make a range of services available to innovative firms, from answering regulatory queries to conducting TechSprints, which are designed to encourage and enhance innovation.

We want to ensure we continue to create the right conditions for firms who are looking to develop and launch innovative businesses models that benefit consumers. Since it was launched in 2016, our regulatory sandbox has supported 60 firms to test their innovation with real customers in the live market under controlled conditions. Insights from tests so far suggest that the sandbox is succeeding in meeting its four objectives:

  • Reducing the time and cost of getting innovative ideas to market, with 90% of firms that tested in cohort 1 progressing towards a wider market launch.
  • Facilitating greater access to finance for innovators with at least 40% of firms that completed testing in cohort 1 receiving investment during or following their sandbox test.
  • Enabling products to be tested and introduced to market by allowing firms to assess commercial viability, consumer reception to pricing strategies, consumer communication channels, business models as well as the actual technology.
  • Working to ensure appropriate consumer protection safeguards are built into innovators’ products and services through measures such as extra capital requirements, systems penetration testing or secondary review of automated advice by a qualified financial advisor.

Global reach

Our sandbox currently only allows firms to conduct tests in the UK but many aspects of financial markets and FinTech are global. Some firms value being able to work with other regulators to conduct tests in more than one jurisdiction. We have also observed, supported and learned from the work of many other jurisdictions in how they promote innovation in financial services.

We undertake a significant amount of international engagement and cooperation in connection with innovation, and have signed nine bilateral cooperation agreements with other jurisdictions which encourage greater dialogue between regulators. We do not currently offer firms the opportunity to participate in a joint sandbox programme with other regulators.

We therefore want to canvass views on the merits of creating a global sandbox. This could potentially allow firms to conduct tests in different jurisdictions at the same time and allow regulators to work together and identify and solve common cross-border regulatory problems, through tests. Under such a model, testing could span two or more jurisdictions.

We are keen to hear from all interested parties on the viability of this proposal, and ideas for how regulators and other stakeholders can work together to take it forward. To help begin this conversation, we are setting out one view on how a global sandbox could be developed. We also remain open and interested in other ideas.

Whether you’re a firm doing business, or looking to do business, here in the UK or overseas, a regulator, a consumer, or any other interested party, we want to hear from you. Please send us your views using our response form or email us at [email protected] by 2 March 2018. We look forward to hearing from you.

What could a global sandbox look like?

Due to the diverse regulatory structures and features of existing sandboxes, a full multilateral sandbox, which allows concurrent testing and launch across multiple jurisdictions, is an ambitious goal.

The global sandbox could focus on the following activities:

  1. Invite applicants to address pre-identified challenges:
    We know firms face certain regulatory problems that cross jurisdictional boundaries, for example developing innovative solutions to Anti-Money Laundering (AML) compliance and Know Your Customer (KYC) on-boarding, and payments services that seek to transfer money cross-border. The global sandbox could help regulators and firms work together to define where these common problems exist, and collaborate to find solutions. Under this approach, participating regulators could set out areas where cross-border testing would be most beneficial, and invite firms to participate in the global sandbox to propose tests to explore these. Firms would benefit from having access to support from multiple regulators in the design and supervision of their test.
     
  2. Support specific firms with cross border ambitions across any sector:
    Innovation is a powerful way of encouraging greater competition in the market. The global sandbox could allow firms who have ambitions to grow at scale in different markets to bring their idea to market more quickly and easily, creating more effective competition. Our experience with the regulatory sandbox in the UK has identified some firms who may benefit from this, and we are keen to hear from firms who could see value in testing their ideas in multiple markets.
     
  3. Seek to address policy and regulatory challenges:
    The global sandbox could convene joint events and/or papers on emerging trends and challenges to leverage the diverse experience of participating regulators and firms, and work toward consistent approaches.

The overall approach would be to better understand and solve common regulatory problems, as well as being more helpful to firms who have aspirations to grow at scale in multiple markets. The degree to which different regulators are involved in each part of the sandbox could vary.

To deliver more immediate results and potentially move us closer to a full multilateral sandbox, there could be other ways to bring regulators together. One option is the global sandbox is initially set up as an international college of regulators who have their own innovation or sandbox models. Firms already working with those regulators would get access to multiple regulators. It also means regulators could collectively share and learn from each other on new innovative business models.

Given the challenges of bringing together a large group of global regulators, longer term consideration will need to be given to creating a more flexible and practical framework for the sandbox.

Questions for consideration

The creation of a global sandbox raises a number of questions about what it could look like and how it would operate. We welcome input on any and all aspects of moving towards a global sandbox. We have set out some questions for consideration but would welcome input on any relevant issues.

Respond to questions for consideration

Next steps

We will consider all feedback received and expect to provide a further update in March 2018.