The Digital Sandbox Pilot – Innovation in Financial Services

Earlier this year, in response to the Covid-19 pandemic, the Financial Conduct Authority (FCA) and the City of London Corporation (the City), launched the Digital Sandbox Pilot (the Pilot) with the aim of testing and developing innovative products and services in the financial services sector which are at the early developmental stage.

The Pilot was in response to indications from the financial services industry that significant value could be generated if the sector had access to a permanent digital testing environment. Data is at the centre of how financial services operate and engage at both a peer level and with their customers but the lack of standardisation of, and challenges to, data access are seen as a market barrier by the industry.

Following assessment by an advisory panel and involving the participation of the FCA and the City, of the 94 applications across three use cases, 30 successful organisations were selected on the basis of four primary criteria:

  • Genuine innovation
    Is the solution significantly different from what already exists in the market?
  • In scope
    Will the solution benefit UK consumers of financial services firms by solving one of the use cases?
  • Need for a Digital Sandbox
    Does the solution require the features of the digital sandbox features to be developed or improved?
  • Testing
    Does the solution have defined development objectives with a pathway to production?

One of the key features of the Pilot is the building of a community of interested stakeholders and other organisations; for this reason, non-selected businesses have been able to be involved through registering their interest in observing the pilot, offering their expertise or being involved in a team.

The use cases cover:

  • Fraud and Scams
    How can advanced data analytics be used to analyse and detect fraudulent payments or transactions and to share information real-time across market participants to reduce fraud?
  • Vulnerability
    How can advanced data analytics be used to identify and manage the risk that a customer may be in a vulnerable state or about to transition to one?
  • 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?

Independent evaluation of the pilot is being undertaken by Grant Thornton who are using the following criteria to assess each application:

  • Innovation
    Role played in encouraging innovation in financial services to the Covid-19-related challenges detailed in the use cases.
  • Speed
    Role played in enabling quicker testing and development of proof of concepts.
  • Collaboration
    Role played in fostering collaboration, facilitating diversity of thinking and creating an ecosystem of key organisations.
  • Pilot features
    The effectiveness of the key features of the pilot (see below) in stimulating and accelerating innovation.
  • Sustainable future
    Role played in informing and assisting the design and future operating model of a permanent digital sandbox.

The pilot is due to run until 5 February 2021.

10 December 2020

Further Information