04.27.2021

Access To FCA’s Digital Testing Accelerated Development

28 organisations took part in the Digital Sandbox pilot. We received 94 applications across the three use cases, demonstrating many innovative solutions from a range of firms and organisations. All applications were reviewed by an advisory panel with expertise in the relevant use case as well as assessors from both the FCA and City of London Corporation.

The pilot has now concluded, and the participating teams presented the solutions they had developed at a series of demonstration days, in February 2021. For anyone who was unable to attend the demonstrations, you can view the recordings of all the sessions on the Digital Sandbox pilot website.

Evaluation report

We have published an evaluation report of the Digital Sandbox pilot. The report sets out the findings of the pilot, including how it accelerated the development of innovative products and solutions within financial services, as well as key lessons learned from the pilot phase.

We found that access to a digital testing environment successfully accelerated development times for the vast majority of participants, as well as benefitting other aspects such as improving product design and refining early-stage business models.

As announced at UK FinTech Week, we will be launching, in conjunction with the city of London Corporation, a second phase of the Digital Sandbox pilot focused on sustainable finance, later in the year. We will also explore, with industry and other stakeholders, viable sustainable operating models for a future, permanent version of the digital sandbox.

The pilot was also an opportunity to collect user feedback to inform and shape future iterations. As set out in the report, we have distilled a range of stakeholder feedback into actionable lessons learned and will be incorporating these into the next phase of the digital sandbox.

Digital Sandbox pilot features

Our experiences and engagement with the industry indicate that developing a permanent digital testing environment would provide significant value to financial services. The Digital Sandbox pilot was aimed at trialling this environment, by providing support to products and services which are at an early stage of development.

Data has become increasingly pivotal to the way firms operate and engage with each other and the consumers they serve. This means that longstanding challenges like data access and standardisation are increasingly a barrier for market participants and innovators. We also receive requests for support from firms which don’t match the eligibility criteria of the regulatory sandbox, but whose proposals may nonetheless deliver desirable innovations in UK financial services.

We piloted the following features as the foundations of a digital sandbox:

  • Access to synthetic data assets to enable testing, training and validation of prototype technology solutions, for example transactional banking data sets, SME lending data and customer accounts.
  • An Application programming interface (API) market place where digital service providers list and provide access to services via APIs.
  • Integrated development environment in which applicants can develop and test their solution.
  • A collaboration platform – to facilitate an ecosystem of key organisations that will provide support and input to digital sandbox participants, such as incumbents, academia, government bodies, venture capital, and charities.
  • 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.

Digital Sandbox use cases

We are provided support to innovative firms and organisations looking to tackle challenges relating to, or exacerbated by, coronavirus. The pilot focussed on 3 pressing areas and we want to provide the necessary support for each, in terms of supplying relevant data sets and expertise.

Fraud & scams

  • How can financial services firms more efficiently and effectively use advanced data analytics to analyse and detect payments or transactions which are fraudulent, or between mules? What alternative datasets could be made available to improve the models?
  • How can the network of relevant bodies, both public and private, readily share data in real-time relating to perpetrators of fraud? This data could include suspected account details, fraudulent websites, known scam typologies, scam emails and calls, and social media approaches. To what extent could improved data sharing be enabled by Privacy Enhancing Technologies?
  • How can technology be better deployed to detect patterns or other indicators of consumer behaviour which may indicate a fraud or scam is taking place and generate friction in the customer journey? Could feedback loops be built in so customers can validate or verify a warning about their transaction?

Vulnerability

  • How can advanced analytics be better deployed to identify and manage the risk that a customer may be in a vulnerable state, or about to transition to one? How can those customers be better supported through human intervention, or other methods?
  • How can technology be used to provide or augment bespoke debt management advice to consumers, who may be experiencing, or about to experience debt challenges in order to improve; the quality of advice; the scalability of advice channels to meet unprecedented demand; or overcome the challenge of unavailability of face-to-face debt advice support
  • How can technology and/or advanced analytics be used to better manage risk and improve lending and credit services in a world of uncertain and unprecedented income fluctuations?

SME lending

  • How can advanced analytics and data science be used to improve modelling, risk assessment or credit scoring of small and medium enterprises in an unprecedented environment?
  • How can technology be used to improve the speed and efficiency of decision making when considering access to finance for a small or medium enterprise?
  • How can existing processes be made digital, to effectively support small and medium enterprises which may be affected by social distancing or other remote working situations?

Advisory Panel

Applications for the pilot were jointly assessed by the FCA and the City of London Corporation with input being provided by an Advisory Panel consisting of:

  • Citizen’s Advice
  • City of London Police
  • Confederation of British Industry
  • Fair4All Finance
  • Innovate Finance
  • National Economic Crime Centre
  • ScaleUp Institute
  • UK Finance
  • StepChange

Source: FCA

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