The UK's Financial Conduct Authority has accepted 24 applicants, from a total of 69, to participate in its fintech sandbox, where innovative financial products can be tested before proceeding to authorisation.
Speaking at a British Bankers' Association conference, Christopher Woolard, director of strategy and competition at the FCA, provided a two-year progress report on the watchdog's Project Innovate, designed to help incumbents and fintech startups navigate the regulatory maze and get new tech-driven products to market.
He says interest in the sandbox has exceeded expectations, with applicants coming from a wide range of sectors including retail banking, insurance, advice and profiling and IPO, and from a spectrum of geographies, including Singapore, Denmark, USA and Canada
"Of 69 applications, we have accepted 24 to develop towards testing, which met the sandbox eligibility criteria, leading us to expand our team to meet demand," says Woolard. "We have also offered assistance via Project Innovate or other colleagues to 40 of the applicants, in some cases to prepare for the next cohort of the Sandbox."
Of the 69 applicants, seven came from payment firms - including blockchain firms.
Speaking on the latter, Woolard adopts a cautious tone.
"I have said before that the FCA does not view blockchain as a panacea, but at the same time although still in its relative infancy, the development of Distributed Ledger Technology (DLT), and its application as blockchain, has the potential to offer genuinely innovative solutions to financial services," he says. "But there are a number of issues to be considered. For example, how do individuals gain access to a distributed network and who controls this process? What data security exists for users?"
He says the watchdog is currently engaged in discussions with government and industry on these issues.
Alongside, the sandbox, the FCA has also fielded 19 applications for the new Advice Unit, which was set up in the wake of the Financial Advice Market Review as a way of supporting firms developing automated models which seek to deliver lower cost advice.
In total, nine firms were accepted onto the unit, of which eight were from established financial services firms, "who want to bring automated advice to the market at scale".
"There will be lessons for everyone - from regulators to firms," says Woolard of the Advice Unit. "With that in mind, we aim to share publicly what we’ve learnt from the Advice Unit’s interactions with firms, in order to give greater clarity to the industry on how to take an automated advice model forward."
Lastly, Woolard touched on the area of RegTech, a developing area in which technology is applied to unwinding the masses of red tape suffocating business development. The watchdog held its first TechSprint hackathon earlier this year, bringing together a cross-section of financial services providers and technology companies to develop prototype solutions to overcome seemingly intractable access barriers.
Woolard says that three of the ideas generated at the event are now being explored commercially as products to bring to market.
"We are now planning to hold a second TechSprint event later this year on the theme of ‘unlocking regulatory reporting’," he says. "This might not be as glamorous as some projects but the costs to firms and to consumers in due course, are very significant indeed, let alone the contribution that could be made to enabling us as regulator to do a better job."