Home Data UK’s FCA engages fintech company to run permanent digital sandbox

UK’s FCA engages fintech company to run permanent digital sandbox

Financial Conduct Authority: Jessica Rusu (inset) said “direct access to academics, government bodies, venture capitalists and charities" would be available through the newly permanent digital sandbox | Credit: FCA

The UK’s Financial Conduct Authority (FCA) has handed a three-year contract with a value of more than £1m (about $1.26m) to a London-based fintech company called NayaOne to run its digital sandbox as it puts the test-space on a permanent footing.

Sandboxes enables innovative projects and solutions to be developed and tested under the close eye of – and with support provided by – regulators. They are becoming increasingly popular among authorities worldwide looking to help private-sector fintech projects.

The FCA’s digital sandbox supports firms at the early stage of product development and has run two ‘pilots’ to date. It is different from the authority’s more established regulatory sandbox, which launched seven years ago and moved from a cohort-based approach to ‘always open’ status in 2021.

The authority is now adopting a similar approach with its digital sandbox, with the test-space becoming permanent this summer – and also appointing a private-sector partner to build and operate it.

NayaOne describes itself as a ‘leading financial technology company focused on bringing financial institutions and the fintech ecosystem together to accelerate digital transformation and innovation in the financial services industry’. In an announcement on its website, NayaOne refers to its FCA assignment as a ‘significant milestone’ for the company and the contract as ‘highly sought-after’.


‘Facilitate firms at early-stage ideation’

The contract awarded to NayaOne is for the ‘Provision of a Digital Test Envi[r]onment’ (DTE), according to a notice published on the UK government’s ‘Contracts Finder’ site. It specifies its value as £1,023,660.

‘The DTE will assist the FCA in achieving its goal of being an agile, innovative, confident and data-driven regulator,’ the notice states. ‘The DTE will aim to facilitate firms at early-stage ideation with access to data, within a secure environment that facilitated experimentation and scaling for proof-of-concepts. This will become form a part of FCA’s external and potentially internal innovation services.’

The notice specifies that the company’s contract is running for an initial term of October 2022 to October 2025. The contract award was made on 29 July last year. Three companies, all small- and medium-sized enterprises (SMEs), submitted tenders, according to a further procurement document.

NayaOne’s chief executive Karan Jain said in the company’s announcement that his team “looked forward to developing the relationship with the FCA and being part of any future focus areas, they have, for development within the industry”.

The company also won a contract, worth £224,500, last year with the UK’s former Department for Digital, Culture, Media & Sport (which lost its digital remit in February as part of a multi-departmental restructure) to ‘conduct testing for the digital identity and attributes trust framework’. In the private sector NayaOne has been working with Lloyds Banking Group on the development of the latter’s own ‘innovation sandbox’, according to an announcement seven months ago.


Data developments

The FCA’s chief data, information and intelligence officer Jessica Rusu spoke about the digital sandbox’s move to a permanent footing at a conference in London on 17 April.

In a speech at the ‘Innovate Finance Global Summit 2023’, she said that the newly permanent sandbox would contain ‘synthetic’ transaction and market data, combined with more than 200 data ‘assets’, including payments and transactions data, investment data and Companies House data. Synthetic data is artificially-generated data and is a way round using ‘real’ consumer data.

“We are also crowd-sourcing data, enabling an open ‘API marketplace’ giving access to other fintech datasets, with over 1,000 APIs already on-boarded,” she told the audience, adding that the sandbox would also provide “direct access to academics, government bodies, venture capitalists and charities”. APIs are application programme interfaces.

Rusu used the speech, which was titled ‘Innovation, AI [artificial intelligence] & the future of financial regulation’, to present numerous further updates about the FCA’s fintech-related agenda.

She highlighted, for example, the creation of a single ‘point-of-entry’ to the authority’s innovation-related services through what she described as a new ‘digital front door’ (webpage). Beyond this, she said, “work will continue and goes much further”, including initiatives such as “evolving our data processing power to simplify the way firms submit data to us”.


Building on sand(boxes)

The FCA ran the first digital sandbox pilot in partnership with the City of London Corporation – the local authority for the Square Mile. It accepted 28 organisations in this pilot. These focused on challenges impacted or exacerbated by the Covid-19 pandemic.

The authority ran its second digital sandbox pilot between November 2021 and March 2022, again in collaboration with the City of London Corporation. It received 40 applications and accepted 12 firms into the pilot, which focused on new products and services in the field of environmental, social and governance (ESG) data and disclosure.

The Global Financial Innovation Network (GFIN) – a grouping, chaired by the FCA, that has grown to more than 80 regulators and supervisory authorities – is also using the sandbox for a recently launched international ‘techsprint’ to tackle so-called ‘greenwashing’. Thirteen authorities including the National Bank of Ukraine and Reserve Bank of India have confirmed their participation in the ‘Greenwashing TechSprint’.

GFIN consulted on the idea of a global sandbox five years ago (after a proposal by the FCA) and two years later ran what it referred to as a ‘cross-border testing’ trial. A subsequent ‘lessons learned’ document stated that the phrase ‘cross-border testing’ (CBT) was now preferred to ‘global sandbox’.

In October 2020 GFIN opened applications for its first official CBT cohort for projects looking to ‘test innovative financial products, services, business models or regulatory technology across more than one country or jurisdiction’. The June-September 2022 period saw the FCA ‘scoping CBT 2.0’, with ‘September 2022 – present’ assigned as ‘CBT 2.0 Design to Launch Phase’, according to GFIN’s annual work-plan for 2022-2023. The greenwashing techsprint is ‘CBT 2.0’.


Financial regulators back international ‘techsprint’ to tackle ‘greenwashing’ – our article (14 April) on the ‘Greenwashing TechSprint

UK financial regulator establishes innovation advisory group – our article (8 February 2023) on the membership of a new FCA innovation advisory group


Ravi Bhalla, head of the FCA’s innovation department and chair of GFIN, is among the speakers at the Global Government Fintech Lab 2023, being held in Dublin on Thursday 18 May 2023. The Lab, our one-day event for senior public servants interested in exploring and implementing fintech solutions, is being organised in partnership with Ireland’s Department of Finance. The event, which is free to attend for all public servants, will feature keynote speeches, panels and breakout sessions focused on fintech-related opportunities and challenges for those working in central government, agencies and other public authorities.