The UK Financial Conduct Authority (FCA) today posted data revealing the type of firms and technology supported by the Regulatory Sandbox and Innovation Pathways, including firm sizes, sectors and locations.

Innovation Hub has been helping firms to develop innovative products and services since launching in 2014. During this period, due to the number of firms the FCA has supported and engaged with, it has gathered a considerable quantity of data and insights into the growing fintech market in the UK. Today, the FCA makes the first step in sharing these insights with the broader market, and is intended to grow over time as it collects more data.

Key facts

• Supporting firms since 2014
• Over 2,000 applications for support
• Over 800 firms have been supported
• Over 150 firms have been accepted for testing in the Regulatory Sandbox

Most business models that were accepted into the Regulatory Sandbox since 2016 were focussed on distributed ledger technology (DLT), blockchain and crypto assets. Sandbox firms pioneered the use of this technology for diverse purposes such as money remittance and share issuance.

Around 15% of firms accepted into the Sandbox had non-technology driven innovative business models and 14% of firms used Open Banking. The latter was used to help consumers track the sustainability of their spending habits, or to help firms make better lending decisions. The FCA has also supported a number of firms using RegTech and artificial intelligence/machine learning to test within the Sandbox.

Most of the firms the FCA supports are unregulated at the point of applying. 84% of firms that apply are start-ups that aren’t currently carrying out any business activities. Many of the firms the FCA supports will go on to become authorised, but the regulator says it is happy to support firms that do not intend to carry out regulated activities. Instead, these firms may be supporting regulated financial services activities (for example, RegTech or SupTech firms).

London is a globally recognised hub for FinTech, but innovative businesses in the UK are not restricted to London. While the FCA remit is UK financial services, it is open to receive applications from firms based overseas who want to expand into the UK.

Most of the firms supported were based in the UK, with 54% based in London and 37% across the rest of the UK. Innovation Pathways has supported firms around the world across Europe, North America and South America.

Over 60% of Regulatory Sandbox firms are based in London and a quarter of firms are based around the rest of the UK. More than one in ten firms the FCA has supported inside the sandbox from 2016 to Jan 2022 were coming to the UK from another country.

Across firms the FCA has supported through Innovation Pathways by sector. From 2014 to 2021, most firms operated in the retail investments, retail banking and payments, and retail lending sectors. The retail investments sector represented between 20 to 43% of firms each year.