The UK’s financial regulator, the Financial Conduct Authority (FCA), has announced the second cohort of its fintech sandbox on June 15. Out of the 24 startups joining this year’s cohort, nine are developing solutions using blockchain technology, which is a testament to the potential that the FCA sees for this new technology to play a major role in the financial services sector of the future.
The FCA’s fintech sandbox allows startups to trial new financial products and services without “incurring the normal regulatory consequences.” The idea behind the fintech sandbox is to boost technological innovation as well as competition in the UK’s financial industry.
The FCA’s Executive Director of Strategy and Competition, Christopher Woolard, stated that the fintech sandbox is growing in popularity as more firms applied for this year’s cohort than for the one in the previous year.
“It is particularly encouraging that both the number of firms applying and accepted for testing has increased in cohort two. That means more innovative firms, trialing more innovative propositions to bring to the market. This is an important part of the FCA’s commitment to promoting innovation and competition in the markets we regulate,” Woolard stated.
77 submissions were received for this year’s cohort of which 31 applicants met the eligibility requirements. Out of the 31 eligible fintech startups, the 24 chosen ones were accepted into the fintech sandbox as they are ready for testing. Now that the second cohort has been finalized, the startups will start testing their new products and services shortly on a small-scale and short-term basis to safeguard consumers while still having enough leeway for innovation to thrive.
The selection of startups is very diverse. The sectors covered by the participating fintech startups include insurance, payments, retail banking, and lending, among others, while new technologies involved include artificial intelligence and blockchain technology.
Meet the Blockchain Startups in the Second Cohort of the Fintech Sandbox
The nine blockchain startups participating in this year’s Sandbox are BlockEx, Disberse, Nivaura, Nuggets, OKLink, Oraclize, Sabstone, Paylinko, and ZipZap.
BlockEx is a digital asset platform that uses the blockchain to power its functionality as an origination, clearing, servicing, and financial asset lifecycle management platform. The platform facilitates blockchain integrations for financial services, capital markets, and governments and will be testing its bond origination and private placements platform.
Disberse is a blockchain-based fund management platform that aims to ensure the transparent and efficient delivery of development and humanitarian aid to its intended recipients. The platform will use the blockchains inherent immutability to create a transparent chain of transactions from donor to beneficiary thus limiting fund loss due to fraud, corruption or misappropriation.
Nivaura is a digital platform that uses the blockchain to issue and manage financial assets. The startup believes distributed ledger technology is the key factor that will drive a revolution in the financial services sector, especially in commercial and investment banking as it allows for the easy automation of services.
Nuggets is an application that gives users control of their data and privacy through the blockchain and biometrics. The consumer application facilitates the use of a single biometric tool for login, payment and identity verification while ensuring the user retains full control and possession of his or her data.
OkLink is a remittance startup that leverages the blockchain to securely transfer money at unparalleled transaction speeds and very low costs. The service boasts thousands of payments a day that include both domestic and cross-border transactions.
Oraclize is a startup that creates real world solutions on the Ethereum blockchain. The startup has a number of projects based on smart platforms. However, in the FCA Sandbox, it will be working on a platform that uses smart contracts and fiat-based tokens to turn digital identity cards into secure digital wallets.
Sabstone is a platform that uses distributed ledger technology to allow companies to request early payments for invoices served to their clients. The platform uses the blockchain to provide security and trust since blockchains are immutable by design.
Paylinko is a payments solution powered by distributed ledger technology. The service allows users to send and receive payments using the blockchain in three easy steps. The process is fast and secure and requires no additional applications.
ZipZap is another remittance startup participating in the FCA Sandbox. ZipZap’s platform uses distributed ledger technology to determine the cheapest and quickest way for money to reach its intended recipient. The platform uses bot fiat currencies and digital currencies to make the money transfers.
The Third Cohort Will Follow in Late 2017
The FCA also explained that the application window for the third cohort is now open stating, “We are now accepting applications from firms to be part of our third sandbox phase. Firms have until 31 July 2017 to submit their applications. The eligibility criteria, application form and instructions on how to apply are available on the Regulatory Sandbox pages on the FCA website. The FCA would expect all accepted firms to be ready to begin testing from November 2017.”
As BTCManager reported in November 2016, the first fintech sandbox already contained a significant number of blockchain startups, including high-profile companies such as Luno (formerly known as Bit-X), SETL, and Tramonex, among others. The high amount of blockchain-focused firms in the FCA’s fintech sandbox highlights the UK regulator’s positive stance towards innovation relating to this relatively new technology.
Also, the fact that the bitcoin exchange and wallet provider Luno was in the first cohort of the fintech sandbox shows that the FCA is open to the digital currency bitcoin and acknowledges the potential benefits that cryptocurrencies can provide to consumers and the wider economy.
Given the high likelihood that cryptocurrencies will play an important role in the future of payments and money transfers, it is surely the right move by the financial regulator to create a collaborative and supportive environment for the right startups to blossom so that the UK’s financial industry can keep playing a competitive role in the future of financial services.