Learn how advice from the Government Chief Scientific Adviser helped launch the world’s first financial regulatory sandbox.
In 2014, the Chancellor of the Exchequer commissioned the Government Chief Scientific Adviser to provide a report on financial technologies (FinTech) futures and to make recommendations that will ensure that the sciences continue to contribute most effectively to FinTech. It looked at:
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What government can do to help achieve the economic potential of FinTech
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How companies can work more closely with academia to ensure that the UK continues to be a world leader in this area
The report recommended a number of actions for government to support the growth of the sector, including the establishment of a ‘regulatory sandbox’.
In the March 2015 Budget, the Chancellor announced that he would take forward the recommendation for the ‘regulatory sandbox’ and charged the Financial Conduct Authority (FCA) with developing:
- A system to allow new ideas to be piloted, and new technologies and consumer propositions to be tested in virtual and real situations without the threat of destabilising financial systems or jeopardising consumer protection. Referred to as ‘regulatory sandboxes’.
The impact from the GO-Science recommendation and the implementation of the ‘regulatory sandbox’ was that in its first year of operation, 146 applications were received, with 41 going through to the testing phase and FCA concluding that :
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Access to the regulatory expertise the sandbox offers has reduced the time and cost of getting innovative ideas to market
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Testing in the sandbox has helped facilitate access to finance for innovators
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Enabling products to be tested and introduced to the market more quickly
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The sandbox allowed the FCA to work with innovators to build appropriate consumer protection safeguards into new products and services
The overall outcome was that the ‘regulatory sandbox’ contributed to making the UK a more attractive place for FinTech start-ups to base themselves, thus adding to the UK economy and the UK’s reputation for tech and innovation.