Regulator wants fintechs to address pandemic financial challenges

The Financial Conduct Authority (FCA) has announced two initiatives to help technology startups to address some of the challenges brought by the Covid-19 pandemic.

The UK financial services regulator has opened applications for the next cohort of startups for its Regulatory Sandbox, in which products can be tested with real customers, and at the same time is part of a project, known as the Digital Sandbox initiative, which supports tech firms with products not yet ready to test.

Cohort 7 for the Regulatory Sandbox and the pilot of the Digital Sandbox initiative will focus on innovations supporting consumers and firms affected by the pandemic.

The FCA said there are three key areas of interest for applications – to prevent fraud and scams, support the financial resilience of vulnerable consumers, and improve access to finance for small and medium-sized enterprises.

“The FCA is a strong believer in the positive power of innovation,” said the FCA’s director of innovation, Nick Cook. “Today we are strengthening the range and scale of support we are providing to innovative firms to deal with the challenges raised by the pandemic.”

The two programmes will together offer support from proof-of-concept development in the Digital Sandbox, to testing new products or services in the Regulatory Sandbox.  

“As a regulator, we recognise the need to continually experiment and learn in order to stimulate innovation,” added Cook.

The Covid-19 pandemic and subsequent disruptions to consumers and businesses have stirred innovation. For example, there has been an increase in demand for digital banking services during the lockdowns as consumers and businesses look for different ways to access services and make them available.

And there is no let-up in investors looking to put money into fintechs, indicating that the coronavirus slowdown will provide an opportunity for some fintechs.

For example, Santander Group is doubling its investment in financial technology after spinning out its innovation funding arm. The Spanish bank will allocate $400m (£312m) to invest in fintech startups through Mouro Capital, which replaces Innoventures.

Fintech pioneer Matthias Kroner told Computer Weekly in June that times like these often provide an opportunity for some companies.

Kroner founded digital challenger bank Fidor back in 2009, during the height of the global financial crisis. “This reminds me of when we founded Fidor, which was right in the middle of the financial crisis,” said Kroner. “People were asking then whether it was a good time to set up a bank. I think these moments of crisis offer us the opportunity to do something better.”

Beyond fintech, Tech London Advocates (TLA) founder Russ Shaw said that after weathering Brexit uncertainty, London’s tech firms face continued challenges.

But looking forward, TLA members that cover a wide range of business sectors see a role for themselves in the fight against, and recovery from, Covid-19, according to a TLA survey.

“The crisis also provides an opportunity for our innovative tech companies to step up and work with government, public services and society at large, to mitigate the impact of the virus,” said TLA.

“Whether healthtech to support the NHS, enhancing workplace tools and network capabilities, or cyber security solutions that protect citizens against the threat of disinformation, the tech sector will need to be as creative and resilient as ever to safeguard itself and the broader digital economy.”