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Peer2Peer Finance News | January 17, 2019

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FCA’s regulatory sandbox is helping fintech grow

FCA’s regulatory sandbox is helping fintech grow
Marc Shoffman

INVESTORS are more likely to feel comfortable backing fintech companies if there is an element of regulation, the Financial Conduct Authority (FCA) claims.

The City watchdog released an update on Friday on the progress of its regulatory sandbox which allows firms to test and develop products, services or business models in a live market environment.

Three quarters of firms accepted into the first cohort have successfully completed testing and 90 per cent of firms that completed testing are continuing toward a wider market launch, the FCA said.

The regulator said feedback from the 50 firms accepted, out of 146 applications, found taking part in the programme provided reassurance for investors to back fintech firms.

“An area of consideration for investors is the regulatory certainty of the firms they are considering investing in,” the FCA said.

“Feedback from sandbox firms indicates that taking part in the sandbox programme provides a degree of reassurance to investors through the oversight the FCA has of the firms’ tests and the increased regulatory certainty participation provides.

“For example, one firm stated that continuous dialogue with us during the sandbox process has enabled them to develop more rigorous policies and processes than they otherwise would have.

“Obtaining authorisation helps firms access funding. For firms that are not yet authorised, the sandbox can offer a quicker route to authorisation, enabling them to provide more certainty to prospective partners and investors.”

Read more: Fintech marketplace in talks with P2P firms

The report covered the progress of the sandbox since launch in June 2016, revealing that most companies were in the retail banking space, with projects covering payment technology, management of personal finance and online platforms such as one giving small businesses access to the forex market.

One participant is Bud, an online platform and app that enables consumers to manage their financial products on a single dashboard. This includes bank accounts, pensions, mortgages and investments, as well as P2P lenders including Zopa and RateSetter.

Read more: Lending Works partners with global money app Revolut