The Financial Conduct Authority (FCA) recently announced that it will be opening its regulatory sandbox all year round, giving even more financial services firms – and fintechs – the opportunity to innovate.
The City watchdog’s initiative was launched in 2016 to let firms test new financial products in a safe space before launching them to the market.
More than 120 firms including banks, charities and start-ups have gone through the sandbox in seven groups, known as cohorts, to test products such as budgeting tools or payment apps.
It previously was only open to applicants at certain times of year but will now operate all year round.
No peer-to-peer lending platforms have gone through the sandbox to date.
However, former P2P lending aggregator Orca was one of 18 companies in the 2017 sandbox, where it tested its proposition that let investors put money into a range of platforms.
Orca allocated investor money to brands such as Assetz Capital, Lending Works, LendingCrowd, Landbay and Octopus Choice.
But it wound down in 2020, blaming regulatory changes and a shift in market sentiment.
It said “high customer acquisition costs… were unsustainable” and that regulatory changes “made the firm’s retail aggregation structure unfeasible”.
Other users of the sandbox included money app Bud, which let consumers access financial products in one place, including some P2P platforms.
The Open Banking Implementation Entity used the sandbox in 2019 to work out how consumers could use the technology to make and receive payments.
And consultancy DLA Piper used the sandbox last year to test a regulatory compliance tool.
An invoice financing platform called Crowdz UK was also in the 2020 cohort and uses smart contracts to tokenise invoices so small businesses can access cash from unpaid bills.
It invites banks to compete for the invoice by offering the best rate.