FCA invites views on cross-sectoral sandbox

Maria Nikolova

The emergence of the ‘hyper platform’ model, such as that adopted by Alibaba, has been among the factors that prompted UK regulators to consider the concept of a cross-sectoral sandbox.

The UK Financial Conduct Authority (FCA) has earlier today published Call for Input, asking for opinions about the concept of a cross-sectoral sandbox.

The Call for Input will be of interest to a very wide range of firms, regulators and consumers, including FCA-regulated firms that (plan to) use emerging technologies to facilitate business models spanning at least one other regulator, firms that consider diversifying their business model into the financial services sector, as well as consumers, Think Tanks, governmental bodies, and policy makers.

The starting point for the concept of a cross-sectoral sandbox is that this is a single-point-of-entry sandbox for firms to test innovative propositions with multiple UK regulators, in a controlled environment.

It is set to allow regulators to work together in a practical way to gain a shared understanding of new technologies, and provide insights on emerging trends in different markets. Such a sandbox might also allow firms to more easily engage with relevant regulators to improve confidence that their concepts are compliant in different regulatory contexts. This could involve live testing of new products in a controlled environment with simultaneous oversight from multiple regulators.

A cross-sector sandbox could also help with new, complex business models. In China for instance, the ‘hyper platform’ model has emerged thanks to entities like Alibaba group. The latter conducts activity from social commerce platforms, retail and wholesale marketplaces, marketing technology, cloud computing, logistics and financial services (Ant Financial). Other examples include Tencent and Baidu.

A cross-sector sandbox may also support those firms looking to diversify into a new sector.

While a cross-sector sandbox presents its own challenges, the FCA stresses that its experience suggests that there are opportunities to be leveraged especially as technology developments such as the internet of things, big data, and artificial intelligence affect multiple sectors. The regulator believes these developments will result in an increasing number of propositions that could benefit from cross-sectoral testing, and where different regulators would benefit from observing and overseeing these tests. This would also help to ensure that these innovative propositions get to market in a manner which protects consumers and promotes competition across markets.

The FCA is inviting views on this concept, with feedback expected until August 30, 2019. 

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