The FCA announced the launch of a 'regulatory sandbox' to allow fintech startups to test products without facing regulatory penalties, with applications opening on May 9, 2016. This sandbox offers secure testing environments, access to APIs, and guidance to facilitate innovation while reducing financial strain. Other regulators, including those in Singapore and Australia, are considering similar sandbox initiatives.

1. Sandbox in Financial Services: An ideal
testing platform
On April 14, 2016, the FCA (Financial Conduct Authority), one of the prime regulators in the United
Kingdom, announced that it was preparing to launch a ‘Regulatory Sandbox’1
. It has started accepting
applications from May 9, 2016 and successful applicants will be able to directly deploy their products in
this sandbox for testing purposes. Quick to follow in their heels are regulators from Singapore and
Australia, who are contemplating setting up a sandbox environment of their own.
So what is a sandbox and why is it taking the FinTech and regulatory world by storm? Let’s find out:
What is a Sandbox?
A sandbox is an isolated environment that allows a program to be executed without affecting the
application it is running on2
. It is used by developers to test new code. It acts as a virtual machine in a
controlled environment, hence making sure that the program does not harm or alter any data in the
server or the host system. This allows developers to test their programs before implementation in the
main system in a secure and safe environment.
How will it benefit FinTech startups?
Microsoft and Markit have written to the Treasury Department’s Office of Comptroller (OCC) regarding a
need for the US regulators to bring in an environment similar to the one implemented by the FCA.
Markit asked the OCC whether companies “have appropriate space to breathe, to develop and test
innovative solutions without fear of enforcement action and regulatory fines," in a letter submitted May
31. Microsoft put forth a demand for a sandbox, stressing on a need for a US version of FCA’s FinTech
approach. Law firm Morrison Foerster and Citigroup echoed this demand.3
Some of the benefits of a sandbox for the FinTech and financial services industry are as follows:
 Financially viable: In order to encourage innovation, various sandbox providers like FinTech
Sandbox provide free data or subscriptions, which would otherwise add to the financial strain on
startups operating within a limited capital. The environment is also freely made available to
subscribers, saving the additional costs startups might have incurred to deploy virtual machines
before actually implementing their products.
1
Crowdfund Insider: FCA Prepares UK #FinTech “Regulatory Sandbox” for Early May
2
Techtarget: Definition of Sandbox
3
CNBC: Banks and start-ups debate regulation

2.  Secure testing platform: As quoted by Christopher Woolard, FCA’s Director of Strategy and
Competition, “The sandbox environment will allow startups to test their ideas without
immediately incurring the normal regulatory consequences”. 4
This will allow startups to test
their products and services for proof of concept, and the FCA is providing individual guidance,
rule waivers and modifications and in some cases “no enforcement action letters”. 5
 Access to APIs: Various sandbox providers also give access to banking data which helps
organizations test, analyze and visualizes data to help get a real world use case. FinTech sandbox
in particular is giving access to SEC-filed data which includes filings and disclosures. Access to
such APIs is normally restricted by banks and financial institutions and also the regulatory
bodies. 6
The FCA too states that it will offer public data sets provided by private firms to
organizations registered to use the platform.7
About Hexanika:
HEXANIKA is a FinTech big data software company which has developed an end-to-end solution for
financial institutions to address data sourcing and reporting challenges for regulatory compliance.
Hexanika's solution improves data quality, keeps regulatory reporting in harmony with the dynamic
regulatory requirements and keeps pace with the new developments and latest regulatory updates.
4
FCA: Innovate Finance Global Summit
5
FCA: Regulatory Sandbox
6
Finance Magnates: FinTech Sandbox Adds EDGAR Online for Firms to Access SEC Filings
7
The Asian Banker: Innovation the “regulatory sandbox” way

3. Contact Us
USA
249 East 48 Street,
New York, NY 10017
Tel: +1 646.733.6636
INDIA
Krupa Bungalow 1187/10,
Shivaji Nagar, Pune 411005
Tel: +91 9850686861
Email: info@hexanika.com
Follow Us