FCA and City of London collaborate to foster innovation during pandemic

Both organisations will work together to develop and launch a digital testing environment to provide innovative firms with access to high-quality data sets for technology solutions.

The digital sandbox will support both large financial institutions and start-ups looking to play a key role in the economy’s recovery from coronavirus. The sandbox will supply the relevant data sets, expertise in supporting vulnerable customers and detecting and preventing fraud and scams, and improved access to finance for SMEs affected by the pandemic.

The data barrier

The FCA stated that data has become pivotal to the way firms operate and the consumers they serve. This means longstanding challenges like data access and standardisation are increasingly a barrier for market participants and innovators. The FCA has therefore recognised that the following features should be the foundations of a digital sandbox:

• Access to high-quality data assets including synthetic or anonymised data sets to enable testing and validation of technology solutions.
• An observation deck – to enable regulators and other interested parties to observe in-flight testing at a technical level, to inform policy thinking in a safeguarded environment.
• Application programming interface (API) or vendor market place – where fintech, regtech and other vendors can list their solutions and APIs, to encourage greater interoperability and foster a thriving ecosystem.
• Access to regulatory support – such as development of testing plans, signposting to relevant regulations, informal steers or support to understand the wider regulatory environment or the authorisation process.

FCA interim chief executive, Christopher Woolard, said: “Innovation is a powerful driver of effective competition and can help accelerate the development of new solutions to emerging challenges.”

“Building on our existing work supporting innovation in the market, we are now helping to establish a platform to tackle the challenges that will face the financial services sector in the recovery from Covid-19.”

Catherine McGuinness, City of London Corporation policy chair, said: “As we look towards recovery, it’s vital that we continue to support innovation, and this digital testing environment provides us with the opportunity to do just that.”