This presentation was used by Innovate Finance in a first response to how the FCA Sandbox Project might map onto Innovate Finance Programmes and Policy Work and how a Virtual and an Umbrella Sandbox might be delivered.

1. Member &
Regulatory
Sandboxes
December 2015

2. 2 |
As an Independent non-for-profit members association, InnFin is well
positioned to support different uses for Regulatory Sandboxes
 Innovate Finance has over 170 members where innovation in Financial Services is the
common theme
 Across the membership continuum Innovate Finance members have expressed a number of
issues and barriers they seek assistance with
 A number of issues and barriers can be addressed through the deployment of Member
Sandbox solutions
 A sandbox is a contained safe place to play – often an environment that is used to “test” a
technological proof of concept prior to public release
 A Regulatory Sandbox should be designed to use the knowledge of the greater community to
accelerate new (little known) innovations
 A number of key design principles MUST be adhered to regardless of Virtual or Umbrella
Sandbox model
 A Virtual Regulatory Sandbox can be up and running in Q1 2016
 An Umbrella Sandbox could help expedite complex innovations that require extended
consumer testing… but will need time to be evaluated

3. 3 |
InnFin has over 170 members… innovation in FS is the common theme
3
Alternative Finance
o
Cyber Security
Cyber Security
Enterprise Software
Capital Markets RegTech
Financial Inclusion and Education
Wealth Management
Investment Solutions
Banking
Money Transfers and FX
Payments
Digital Currencies and Blockchain
Insurance Telco

4. 4 |
Across the membership continuum InnFin members have expressed a
number of issues and barriers they seek assistance with
4
Can you help us
get a bank
account?
Foreign Start-ups /
BitCoin Plays
Can you help us get
on Institutional
Preferred Suppliers?
Lists
Start-ups
How can we work
with institutions?
Start-ups
What are our
compliance
requirements?
Start-ups to Institutions
How is this area
(going to be)
regulated?
Currency / Blockchain /
DLT
How can we expedite
the authorisation
process?
Start-ups
How do we
demonstrate our use
case to the community?
Start-ups to Institutions
How can we agree
emerging
interoperable
standards?
Start-ups to Institutions

5. 5 |
A number of issues and barriers can be addressed through the
deployment of Member Sandbox solutions
5
Start-ups
Institutions
• Bank account
• Access to institutions
• Preferred supplier access
• Promotion
• Showcase for technology
• Prototype environment
• Regulatory “Fit for Purpose”
• Authorisation Approval
• Compliance
• Use case lab
• Interoperable standards
• Industry adoption
Start-up Sandbox
Showcase Sandbox
Regulatory Sandbox
Industry Sandbox
Member Issues & Barriers Sandbox Solution

6. 6 |
A sandbox is a contained safe place to play – often an “environment”
that is used to “test” a technological proof of concept prior to public
release
6
“A sandbox is a testing environment that isolates
untested code changes and outright
experimentation from the production
environment or repository, in the context of
software development…”
Wikipedia – Software Development
“A sandbox is a security mechanism for
separating running programs. It is often used to
execute untested code, or untrusted programs
from unverified third parties, suppliers, untrusted
users and untrusted websites.”
Wikipedia – Computer Security

7. 7 |
A Regulatory Sandbox should be designed to use the knowledge of the
greater community to accelerate new (little known) innovations
7
• One of the largest barriers regulators
face is new innovations and ways of
working
• Often, the knowledgebase of new
innovations - how they work, and
potential risks are rewards - is difficult
to baseline and assess
• By engaging the great community of
financial services professionals in a
structured process, knowledge and
experience can be more rapidly built
• The objective of defining this as a
formal process in a Regulatory
Sandbox should be to make
transparent and accelerate the
DECISION
Diffusion of Innovation, Rogers
Primary Innovation Scope of a
Regulatory Sandbox

8. 8 |
We have mapped the proposed FCA Virtual Sandbox and Umbrella
Sandbox to the InnFin Solutions
8
Start-ups
Institutions
• Bank account
• Access to institutions
• Preferred supplier access
• Promotion
• Showcase for technology
• Prototype environment
• Regulatory “Fit for Purpose”
• Authorisation Approval
• Compliance
• Use case lab
• Interoperable standards
• Industry adoption
Start-up Sandbox
Showcase Sandbox
Regulatory Sandbox
Industry Sandbox
Member Issues & Barriers Sandbox Solution
1 FCA Virtual Sandbox
2 FCA Umbrella Sandbox

9. 9 |
A number of key design principles MUST be adhered to regardless of
Virtual or Umbrella Sandbox model
 The ultimate objective of a Sandbox is to accelerate greater market competition
and range of access to quality financial solutions by consumers
 Sandboxes need to be open and accessible to all FinTech players, from seed start-
ups to Institutions
 All Sandbox applicants must pass a “fit for purposes” test prior to entry into the
Sandbox
 A joint working Steering Group should be established between Project Innovate
and Industry / Membership Associations to foster collaboration
 The collaboration should focus on the improvement of working processes and skill
levels of ALL of the involved parties

10. 10 |
A Virtual Regulatory Sandbox can be up and running in Q1 2016
10
InnFin Regulatory Sandbox
1 FCA Virtual Sandbox
Improved
“Fit for
Purpose”
Application
Completion
Support
Case Worker
Assist
Quick Wins
Implement
Q1 16
Restricted
Authorisation
NAL /
IG
Waivers
Analyse
Q1/2 16
Implement
Q2+ 16
New
Regulatory
Activity
Broadening
FSMA Waiver
Test
Amendment
to Exemptions
Order
Analyse
Q2/3+ 16
Implement
Q3+ 16
Case Study 1 – RoboAdvice
Case Study 2 – Block Chain
Case Study 3 – RegTech

11. 11 |
An Umbrella Sandbox could help expedite complex innovations that
require extended consumer testing… but will need time to be evaluated
KeyActivities
Discovery &
Planning
Data Collection
& Mobilisation Phase 1
Design &
Selection Phase 1
Implementation
& Execution Phase 1
Monitoring &
Evaluation
1 2 3 4 5
Q1 16 Q2+ 16 Future dates TBC
InnFin Industry Sandbox
2 FCA Umbrella Sandbox
• Develop U-Sandbox
Hypotheses Models
• Engagement
• Participants
• Liability
• Funding
• Develop U-Sandbox
Programme Plan
• Roadmap / Delivs
• Governance
• Time Plan
• Budget
• Collect Data
• Sandbox
• Benchmark
• Financial Models
• Best Practices
• Mobilise Community
• Identify Team
Members
• Recruit Team
Members
• Perform Team
Building
• Design U-Sandbox
Operating Models
• Engagement
• Participants
• Liability
• Funding
• Evaluate & Select
Operating Model
• Consumer Test
• Sandbox Test
• Participant Test
• Regulator Test
• Implement U-
Sandbox Op-Model
• Engagement
• Participants
• Liability
• Funding
• Implement
Governance &
Control Processes
• Organisation
• Process &
Controls
• Monitor and Evaluate
• Engagement
• Participants
• Liability
• Funding
• Build Feedback Loop
and Improve
• Engagement
• Participants
• Liability
• Funding
Example, Industry-led Umbrella Sandbox design and implementation roadmap
U-Sandbox Plan U-Sandbox Options U-Sandbox Implementation

12. 12 |
As an Independent non-for-profit members association, InnFin is well
positioned to support different uses for Regulatory Sandboxes
Product
Testing
Platform
Testing
RegTech
Testing
Delegated
Supervision

13. |
End
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