The UK’s Financial Conduct Authority (FCA) is stepping up its innovation game with the launch of a Digital Sandbox. The platform will support fintechs in developing new proofs of concept for products and services, said Jessica Rusu, chief data, information and intelligence officer at the Innovate Finance Global Summit.
The Digital Sandbox is expected to provide synthetic transaction and market data and offer payment and transaction data, investment data, Company House data, and Covid data, as well as other things. It will also feature an open ‘API marketplace’ that provides access to other fintech datasets.
Rusu said the sandbox will be available even for applicants outside of, or after, specific TechSprint activities. From summer 2023, innovators from a broader range will be able to access its expanded services. “We benefit from supporting this innovation by promoting solutions to complex regulatory challenges like APP fraud, greenwashing, and scam detection,” she added.
One of the FCA’s primary aims is to reduce regulatory burden for the UK’s regulated entities. The digital front door will simplify the journey for firms to engage with the regulator’s innovation services by providing a single point of entry. The regulator has also introduced digital tools, including decision trees and a FAQ digital assistant.
“UX continues to be a major focus of our work,” said Rusu, adding that the regulator had streamlined its Sandbox and Innovation Pathways application forms to provide a more user-friendly journey.
The FCA has also introduced predictive analytics to reduce late firm submissions, which helps firms submit data on time and reduces late fees for firms. The regulator has joined forces with the Bank of England for the Transforming Data Collections initiative, focused on reducing firm regulatory burden.
The FCA is also collaborating with international counterparts. A group of 23 regulators launched the Global Financial Innovation Network (GFIN) in 2019 to help innovative firms interact with regulators across borders in more efficient ways. Rusu said the regulator is hosting a world-first global TechSprint with its GFIN partners in support of tackling greenwashing.
The TechSprint will bring together technology experts, firms, and an international group of regulators to address issues related to greenwashing. The virtual TechSprint will run on the regulator’s Digital Sandbox and leverage its synthetic data testing platform.
The regulator will also host a TechSprint focused on Financial Services Register data in May. The FCA plans to explore new ways in which third-party entities, like comparison websites, can utiliSe Register Data to provide consumers with more proactive access to information when making investment decisions.
“We’re laser-focused on this topic because as the demand for ESG-related products and services continues to grow, so does the risk of firms potentially overstating their sustainability credentials to attract customers and investors,” Rusu said.
In addition to providing Innovation firm support, TechSprints, and supporting international regulatory collaboration, the regulator is continuing to progress its work in Artificial Intelligence.
“We’ve carried out extensive work to understand AI and consider its regulatory implications, as well as utilising AI methods to identify bad actors,” Rusu said.
She added that the regulator is collaborating with the Digital Regulation Cooperation Forum and also working through what the appropriate framework for AI in financial services could look like.
London-based company NayaOne is celebrating after bagging the ‘highly sought-after Digital Sandbox tender’ by the FCA. It called it a reflection of the company’s “innovation, vision, and commitment to advancing the fintech landscape”.
“We’re thrilled to have been selected for this prestigious opportunity to collaborate with the FCA on driving innovation in financial services,” said Karan Jain, CEO at NayaOne. “We believe that our digital transformation platform and synthetic data technology will be a valuable asset in helping fintech companies to develop and test their products more efficiently and effectively.
“We look forward to developing the relationship with the FCA and being part of any future focus areas, they have, for development within the industry.”