[co-author: Ciara Turner]

On 15 June 2017, the FCA revealed that 31 firms have been admitted into the second cohort of its regulatory sandbox. The sandbox was launched last year as part of the FCA's Project Innovate and creates a "safe space" for companies to test their products and services without the risk of incurring any regulatory penalties. The FCA's forward thinking initiative has now gone global with Singapore, Hong Kong, Canada, Australia and the US all running their own versions of the sandbox in a bid to encourage innovation and competition in their own jurisdictions.

Diversity is on the up

Word seems to have spread about the sandbox as the FCA received applications from 77 firms wanting to be part of the second cohort, up from 69 the first time round.  The final cut includes a number of firms based outside of London which reflects the FCA's commitment to strengthening its engagement with regional and Scottish FinTech hubs, as outlined in its Business Plan which was published in April this year. The products and services being tested are equally as diverse and cover a variety of sectors including insurance, payments, retail banking, consumer lending and investments.

Of the 31 firms that met the FCA's eligibility criteria, nine are actively using blockchain or distributed ledger technology (DLT) which is testament to the perceived importance of the technology for FinTech innovation.  The second cohort also includes the first firm to test robo-advice in the sandbox which was a notable omission from the previous cohort.

Roll call

Among the firms who will benefit from being part of the second cohort are:

• Assure Hedge – A web-based platform offering forex options to assist SMEs and individuals to protect against losses incurred because of currency fluctuations.
• Insure A Thing - An alternative insurance business model where the consumer makes payments at the end of the month, based on the exact cost of claims settled during that period.
• Money Dashboard - A tool that aggregates and organises consumers' financial transactions from multiple online accounts.
• Nuggets – A consumer blockchain application that gives users a single biometric tool for login, payment and identity verification without sharing or storing data.
• Oraclize – A DLT based e-money platform which turns digital identity cards into secure digital wallets through the use of smart contracts and fiat-backed tokens.
• Saffe – A smartphone app that allows consumers to authenticate payments with "selfies".
• ZipZap - A cross-border money remittance platform that chooses the most efficient means for a payment to reach its destination, including via digital currencies.

A full list of the successful applicants can be found here.

Progress report

The six month testing window for firms in the first cohort ended in April this year and firms are currently busy filing their final reports before they transition out of the sandbox. The fact that the FCA has announced it expects most of these firms to take their propositions to market strongly suggests the first phase of the sandbox initiative has been a resounding success. This will no doubt encourage the 24 firms in the second cohort who are already poised to begin testing in a live environment.

Third time lucky?

In the wake of the success of the first cohort, the FCA has announced that it is now accepting applications for its third sandbox cohort.  Firms who are interested have until 31 July 2017 to submit their applications and, if successful, they will begin testing in November this year.