We are pleased to announce that JO1N has officially been accepted to the UK Financial Conduct Authority (FCA)’s Regulatory Sandbox which allows firms to test innovative offerings in a live environment. More information on the FCA’s sandbox can be found here.

As part of the sandbox, we will be part of cohort 7 and will conduct our test alongside 12 others that have also been accepted to test in the sandbox. Baker’s dozen We believe that this is a great opportunity to enhance our product while making sure that we are delivering great value to the consumers.

What is the Sandbox?

Since the inception of the sandbox, around 150 innovative companies have been accepted to test their products and services in the FCA’s sandbox. This year’s cohort consists of 13 companies that we are proud to be a part of.

The undisputable message is that the sandbox has delivered tangible value to firms, ranging from guidance on the implementation of regulatory frameworks to innovative propositions to reviewing the risks relating to their business model. While the FCA has emphasised strongly that it does not “cherry-picking”, the feedback from our internal research on previous participants is that being accepted into the sandbox, and testing the underlying technology in a live environment, has historically increased the trust and credibility of firms among consumers and investors.

In this post, we summarise the observations that emerged from our application. The story is not complete and there are more stages for us to go through, but we thought it would be useful to share our journey so far

Why did we apply to the FCA Sandbox?

We wanted the Sandbox to help us achieve the following:

• Gain experience working closely with the FCA giving us a deeper understanding of the regulatory environment and our role
• Utilise the testing environment to assess and calibrate our credit risk models
• Reduce time-to-market at a potentially lower cost
• Receive an opportunity to test our Minimum Viable Product in a closely supervised live environment
• Collaborate with other innovative start-ups in the same Sandbox cohort.

Participation in the Sandbox: 4 phases

1. Application – Done!
2. Authorisation
3. Testing
4. Exit

Application – key observations

• Fun: Our team will never forget the sleepless night right before New Year’s eve when finalising the last bits by the application deadline. We did not use any legal support from a law firm, in fact completing the application all on our own. The process could have been easier, but as a nimble start-up, being smart with the cashflows is very important. Moreover, thanks to the outstanding support and clear communication with the FCA Sandbox representatives, the journey seemed fun, rather than a burden.
• Plan: The authorisation process is down the line for JO1N, however, this will be simpler as we regulation from the start, as part of the design process.
• Taking care of little ones: The FCA sandbox equips start-ups with an outstanding tool to compete with incumbents, helping to encourage competition, allowing them to get up to speed with financial regulation and think about how this relates to their business models and best position them to develop their innovations. Remember, it’s the start-ups that create new paradigms
• Resources, resources, resources: Most start-ups underestimate the time and resources required to prepare for testing and the challenge of running a test alongside servicing existing clients and business development. JO1N team took a long time to polish the projections, negotiate with the potential customers to be able to juggle multiple processes at once.
• Create viable KPIs: The key reason for participation is the opportunity to run tests on the regulated products under close supervision. For this purpose, tests and KPIs were designed to address the business success factors of a test solution that was operating within a regulated environment and under real-world conditions.

Authorisation, Testing & Exit

The authorisation, testing and exit phase haven’t started for us yet but we are looking forward to what comes next and for what the future will bring

Once we receive the required authorisation, we will start testing. However, it’s important to recognise that there might often be a big-time interval between being accepted into the sandbox and therefore the start of any testing.

In many cases, it might take a few months to obtain the restricted authorisation(s). And even after a firm is authorised, mobilising capabilities for testing can be time-consuming – specifically customer acquisition and even opening a business bank account under the current market conditions have proven to be common challenges for new entrants.

It is important to note that concerning customer acquisition, firms testing in the sandbox are responsible for identifying real customers to perform their tests with. Start-ups with few or no customers (and sometimes limited marketing budgets) tend to find this a bigger challenge than more established firms with an existing client base. When appropriate, partnerships with other firms can help overcome this obstacle, for that reason we have carefully planned the rollout and hope to surprise you with big announcements quite soon.

In addition, for resource-constrained start-ups, running a test alongside business-as-usual activities and existing clients can be a significant challenge. On the other hand, a tight testing time has benefitted some firms because it forced them to prioritise and accelerate the development of their innovative products.

What happens after the test?

At the end of the sandbox testing period, the tests will be reviewed by both the firm and the Sandbox team to assess the test against a range of success measures. The FCA will then work closely with each firm to ensure that the appropriate course of action is taken as they progress out of the sandbox.

Closing thoughts

We hope that our experience will help other innovative companies to apply and succeed in the next cohort. Moreover, we are confident that something good is waiting for us ahead. Looking forward to more all-nighters

Stay tuned for more exciting news, more articles on our step-by-step application guide to follow up soon.

Join us on our journey!  ‍