2018年-德勤全球_A_journey_through_the_FCA_regulatory_sandbox_12页_976kb

FCA Regulatory Sandbox Summary

Core Content

The FCA regulatory sandbox, launched in 2016, has become a pivotal tool for FinTech innovation in the UK. As of the latest data, 89 firms have participated in the program, with the number of applicants continuing to rise. The sandbox allows firms to test innovative financial products and services in a controlled regulatory environment, thereby reducing risks and enhancing market credibility.

Main Points

Application Process

• Initial Step: Firms must submit an application outlining their business plan and how it meets the sandbox's eligibility criteria.
• Regulatory Review: The FCA may request additional information or clarification before approving the application.
• Testing Duration: Accepted firms typically have a testing period of 3–6 months.
• Reasons for Application:
  • Understanding regulatory requirements
  • Speeding up the development of a minimum viable product
  • Testing with real customers to refine the business model
  • Gaining market credibility and investor confidence

Authorisation

• Regulatory Engagement: The authorisation process is often complex, especially for start-ups with limited financial services experience.
• Regulatory Savvy: Firms with prior financial services knowledge or those that embed "regulation by design" into their models find the process easier.
• Legal Support: Start-ups without financial services background may need to invest in external legal and compliance resources.
• Case Officer Role: The FCA case officer plays a crucial role in guiding firms through the process, though continuity can be an issue if the officer changes.

Testing Phase

• Testing Lead Time: There can be a significant delay between acceptance and the start of testing due to the time needed for authorisation and setup.
• Customer Acquisition: Firms must identify real customers for testing, which is more challenging for start-ups with limited resources.
• Testing Flexibility: Firms have considerable freedom in designing their test plans and selecting KPIs to measure success.
• Regulatory Flexibility: The FCA is generally open to minor amendments to testing plans and KPIs, provided consumer safeguards are in place.
• Unexpected Benefits:
  • Increased legitimacy with customers and investors
  • Confidence in strategic plans
  • Insight into product flaws and opportunities for business model refinement
  • Understanding of regulatory environments for potential clients

Exit from the Sandbox

• Exit Process: Firms must submit a final report and have an exit plan in place, which may include customer safeguards.
• Variability in Exit: Some firms transition smoothly to full authorisation, while others may have an unclear or ongoing relationship with the FCA.
• Options for Exit:
  • Apply for full authorisation
  • Reconsider business model or regulatory position
  • Become a pure technology provider without regulated activities

Key Challenges

• Time and Resource Constraints: Many start-ups underestimate the time and effort needed for preparation and testing.
• Regulatory Complexity: Navigating the FCA handbook is a significant challenge, especially for less experienced teams.
• Uncertainty in Exit: The exit process lacks clarity for some firms, particularly those in earlier cohorts or with complex models.

Recommendations and Next Steps

• Simplification of Rules: The FCA should provide clearer guidance, such as a "Financial Regulation 101" starter-pack.
• Extended Testing Periods: Consider allowing longer timeframes or starting the timer after authorisation is obtained.
• Cohort Interaction: Facilitate networking among firms in the same cohort to share insights and strategies.
• Global Regulatory Sandbox: Develop a global regulatory sandbox and network to support cross-border innovation, with a clear structure and coordination.

Conclusion

The FCA sandbox has proven to be a valuable platform for FinTech innovation, helping firms navigate regulatory challenges and gain credibility. Despite its successes, there are areas for improvement, including better guidance, clearer exit procedures, and enhanced global collaboration. The program has successfully demonstrated that regulation can support innovation rather than hinder it, and its evolution continues to be a focus for the FCA and industry stakeholders.

Key Quotes

• "The FCA sandbox levels the playing field between incumbents and startups, by allowing smaller firms to get up to speed with financial regulation and think about their business models as much as their innovation."
• "We are humbled to say that without the FCA regulatory sandbox we wouldn't have been successful."

Contacts

• David Strachan
  Partner, Risk Advisory
  Head of EMEA Centre for Regulatory Strategy
  dastrachan@deloitte.co.uk

• Suchitra Nair
  Director, Risk Advisory
  EMEA Centre for Regulatory Strategy
  snair@deloitte.co.uk

• Valeria Gallo
  Manager, Risk Advisory
  EMEA Centre for Regulatory Strategy
  vgallo@deloitte.co.uk

• Morgane Fouché
  Assistant Manager, Risk Advisory
  EMEA Centre for Regulatory Strategy
  m fouche@ deloitte.co.uk