The sandbox, first proposed in November last year, will allow firms to test-drive new products and services without immediately having to meet all the normal regulatory requirements.
Although organisations hoping to use the service will have to meet FCA eligibility criteria, the regulator revealed that unauthorised firms can still be granted access for “testing purposes”.
In its business plan for 2016/17, the UK authority explained that the ‘safe space’ is designed reduce the time and cost of bringing new products to market in a bid to encourage firms to be innovative and to increase competition.
An added bonus for eligible firms is that they will benefit from “individual guidance, waivers and no enforcement action letters”, according to the FCA report.
The report said: “Too often firms have to spend considerable amounts of money bringing innovation to market, not least because they must meet regulatory requirements immediately. This acts as a brake on developing new services and products and limits competition.
“We want more firms to embrace innovation. We hope our sandbox will speed up the time it takes for new and innovative products to reach market and start benefiting customers”
The authority also urged the industry to set up a not-for-profit company to act as a sandbox ‘umbrella’, admitting that it was still waiting for a response.
The sandbox will form part of the FCA’s wider Project Innovate – an initiative launched in October 2014 which aims to encourage innovation in the interests of consumers and promote competition through disruptive technology and ideas.
In addition, the FCA has announced that it will set up a specialist ‘advice unit’ to deal with robo-advice firms – in line with recommendations made in the Financial Advice Market Review (FAMR) last month.
According to the regulator, the new unit will operate in a similar way to Project Innovate and will help firms to set up so-called robo-advice, which replaces face-to-face financial assistance with computer guided help.