In 2014, the UK Chancellor asked the Government Chief Scientific Adviser to look at the future of financial technologies and recommend how science could best support the sector, according to a government case study. The review examined two main questions: what government could do to unlock FinTech’s economic potential, and how companies could work more closely with universities so the UK could stay ahead as a global leader. One of its key ideas was the creation of a “regulatory sandbox” to help new financial services test safely before going fully to market.
Following the report, the March 2015 Budget confirmed the plan. The Chancellor asked the Financial Conduct Authority to design a system where new technologies and consumer products could be piloted in both virtual and real settings, without risking financial stability or weakening consumer protections. This controlled test space became known as the regulatory sandbox.
Take-up was strong from the start. In its first year, the sandbox received 146 applications, with 41 firms moving into the testing phase. The FCA later reported that access to its regulatory expertise helped reduce the time and cost of bringing new ideas to market. Testing under supervision also made it easier for innovators to secure finance and refine their products.
The sandbox gave the FCA a chance to work directly with start-ups and other firms to build consumer safeguards into products from the outset, rather than trying to fix problems later. That meant new tools and services could be launched faster, while still protecting users.
Overall, the science-led recommendation and its rollout helped make the UK a more attractive base for FinTech startups. The regulatory sandbox strengthened the country’s reputation for responsible innovation and added momentum to a sector that now plays a major role in the UK economy.
