What is a Regulatory Sandbox?

Why did Rebank apply?

Some of what Rebank does is new to Fintech. Opening a dialogue with the regulator felt more important than usual for that reason.

We also applied because we wanted to build Rebank with compliance in mind from the beginning. All too often, the regulator is treated as the boogeyman; an empty threat muttered so teams do as they’re told. That wasn’t the way we wanted to work at Rebank — compliance should be ingrained in the way everyone works.

What actually happens in a Regulatory Sandbox

The assumptions made about what happens in a Regulatory Sandbox range from the interesting to absurd. Here are a few we’ve heard:

The Regulator does all the work for you

One misconception is that the regulator does all the work for you. Sadly, this isn’t true.

The first few days of the Sandbox are about getting familiar with the regulation that your product is exposed to. We were guided to documentation and the final application that we’d eventually fill in — this was when it all became real which was quite daunting for a small team but our contact was extremely helpful and explained what was expected of us.

You will be fast-tracked

If you join the FCA Sandbox, the regulator prepares a plan for you to fast-track your authorisation, right?

Nope!

We created a plan and milestones that we shared with our contact. We arranged check-ins to allow time for questions and so that our contact could track progress against that plan. As schedules and timelines changed, so did the frequency of these check-ins.

Consumers are at greater risk from companies in the Sandbox

Certain license requirements are waived, putting consumers at greater risk!

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We were not given an alternative, easier application (sadly). The application process we went through is the standard, arduous application that all companies are required to complete.

However, to mitigate unforeseen risks the FCA adds certain limitations for each participant. In our case, we could only work with ten companies during the testing period. We proposed the limit as it was enough for us to test our hypothesis. That limit can be lifted afterwards through a review process that the FCA carries out.

The final report

Once you validate your hypothesis or the testing period ends you are asked to prepare a final report. This report covers questions around how successful the test was, what you were surprised to find and any next steps.

In our report, we mentioned that the slow reaction of ASPSPs (banks) had a negative effect on the ability of TPPs (non-banks) to launch products. We also shared what we learned about bank aggregation as a value proposition for businesses!

Should you take part in the FCA Sandbox?

There’s little chance of anyone asking but if they did; would we recommend the FCA Sandbox?

Yes! 100%‍

It provided early external validation which was a useful way for us to engage with our initial customers. It allowed us to engage with the regulator and learn how to do it effectively, plus we gained a great understanding of what additional responsibilities Fintech companies have when building products!