FCA issues sandbox progress report

FCA issues sandbox progress report

Around 90% of firms that tested their products and service ideas in the first cohort of the Financial Conduct Authority's regulatory sandbox have progressed towards a wider market launch.

The FCA sandbox first opened for application in June 2016 to provide a safe space for firms to test innovative products, services or business models in a live user environment. Since then, the FCA has received 146 sandbox applications. Of these, 50 were accepted and 41 progressed to testing which has been run in two cohorts.

In a report outlining the lesson learned in its first year of operation, the FCA says the initiative has proved its worth in reducing the time and cost for firms of getting innovative ideas to market and testing the commercial viability and pricing strategies for new product launches. The FCA says that around a third of firms that tested in the first cohort used the learnings to significantly pivot their business model ahead of launch in the wider market.

The regulator says that testing in the sandbox is also an aid to firms in search of funding by providing more certainty to prospective partners and investors. The FCA says that at least 40% of firms which tested in the first cohort of the sandbox received investment either during or following their sandbox tests.

Among larger firms and banks testing startup propositions, the sandbox experience has helped them to identify ways to improve their own procurement and governance processes for on-boarding start-ups. "Being able to experience this in the sandbox enabled them to construct a more efficient process for future partnerships," states the report.

The study also highlights some of the challenges faced by firms in conducting their tests within the sandbox, including accessing banking services and sourcing of customers to take part in the trials.

Christopher Woolard, executive director of strategy and competition at the FCA, says: “We have seen tests across the full range of sectors that we regulate and I’m pleased that the majority of firms that have tested products in the sandbox have gone on to take their innovation to market.

“It is important that we continue to evaluate the success of our interventions so that we can identify areas where improvements can be made to help both firms testing and ultimately the consumers they are serving.”

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