Firms would be invited to test out their ideas while receiving regulatory and technical help.
The regulator said it understood data had become increasingly central to the way firms operated and engaged with each other and their customers.
But it recognised that access to data and its standardisation had been a long-standing challenge for the financial services sector and created a barrier to innovation.
One of the proposed features of the testing ground will give firms access to data sets that would allow them to test their solutions and a list of other firms’ APIs so that they can interact with each other.
The regulator also wants to encourage collaboration among firms to solve industry-wide problems. Within the sandbox, the FCA is proposing to set up a platform that will allow firms to share their ideas and what they have learned.
An observation deck where regulators and stakeholders can watch the testing and use it to inform their policy making, has also been proposed.
The regulator had been exploring the idea of a digital sandbox before the Covid-19 pandemic, but has sped up its launch in the wake of the crisis.
Regulated, unregulated firms and other stakeholders are being invited to contribute to the pilot. The FCA will update its website with details of the features that will be included.
Applications to be part of the digital sandbox will be accepted from the summer.
Email email@example.com to express your interest.