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Digital mortgage innovations win FCA sandbox approval

  • 15/06/2017
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Digital mortgage innovations win FCA sandbox approval
The Financial Conduct Authority (FCA) revealed that two digital mortgage projects were successful in bids to test products in its regulatory sandbox.

The sandbox allows businesses to test new products in a live environment, while ensuring customers are protected. It is part of the FCA Innovate initiative – started in 2014 to encourage competition for the benefit of consumers.

The two successful mortgage market projects were proposed by Experian and Money Dashboard.

Money Dashboard will be testing a tool that offers an instant view of consumer affordability by aggregating and organising financial transactions from online accounts and mapping them to mortgage lenders’ criteria, supporting a digital mortgage journey.

Experian is to test a mortgage eligibility tool that aims to help consumers understand which products they may be eligible for, based on the lender’s affordability criteria.

In addition, other firms will be testing blockchain and identification technology, plus artificial intelligence software to observe client behaviour and better determine client preferences before financial advice is given.


Ready to proceed

In all 77 firms applied for the second round of sandbox testing, with 31 meeting the FCA’s criteria and subsequently 24 ready to proceed.

Christopher Woolard, executive director of Strategy and Competition at the FCA, said: “The sandbox continues to grow in popularity and 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, trialling 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.”

Tests will be conducted on a short-term and small-scale basis and the FCA has worked with the sandbox firms to agree testing parameters, building in consumer safeguards. Seven firms were not ready to begin testing and may be part of cohort three.


Phase one

In the sandbox’s first phase, the majority of firms were based in London with a small number from other parts of the UK. The proportion of regional firms is higher in this cohort.

Meanwhile, the 18 firms from the first phase have finished testing and are submitting final reports, which will be reviewed before they transition out of the sandbox.

The FCA said the majority of tests have developed as planned and it expects most firms to take forward their propositions to market.

Firms have until 31 July to apply to be part of the third sandbox phase.

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