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FCA wants data analytics to help identify vulnerable customers and prevent fraud

  • 05/10/2020
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FCA wants data analytics to help identify vulnerable customers and prevent fraud
The Financial Conduct Authority (FCA) is focussing on preventing fraud and scams and supporting vulnerable consumers though its innovation hubs.


The regulator will use its next cohort of regulatory sandbox and the first intake of its digital sandbox users to develop solutions supporting these areas.

Improving access to finance for small and medium sized enterprises is also on the FCA’s list for the sandboxes, but the regulator said it was not restricting its intake for the regulatory sandbox to these areas.

“We are not limited to the above and will consider proposals intended to help with the consequences of coronavirus, and indeed any innovative financial services ventures,” it said.

“These propositions must be genuinely innovative, show clear consumer benefit and meet all of our eligibility criteria.”


Analytics helping vulnerable consumers

The digital sandbox pilot, which has been launched with the City of London Corporation, aims to support earlier stage innovation where products and solutions are still in development and not at the stage where they are ready to be tested with consumers or in a live production environment, the regulator explained.

The pilot will evaluate the effect that offering certain assistance to innovative firms, such as access to synthetic data sets, has on enabling new ideas to get to market more quickly, as well as the associated benefits for regulators and incumbent firms.

Entrants into the digital sandbox must be focused on one of the three main subject areas.

For vulnerable customers, one of questions posed is how analytics can be better deployed to identify and manage the risk that a customer may be in a vulnerable state, or about to transition to one?

And how can those customers be better supported through human intervention, or other methods?

The FCA is also asking how technology can support debt management advice and whether analytics can be used to better manage risk and improve lending decisions.

For fraud and scams the regulator is asking applicants to consider how analytics can analyse and detect payments or transactions which are fraudulent, and what patterns of consumer behaviour should raise red flags.

And it wants to know what data financial regulators and other bodies should be sharing and how easily this can be done in real time?


Pandemic challenges

FCA director of innovation Nick Cook said: “Today we are strengthening the range and scale of support we are providing to innovative firms to deal with the challenges raised by the pandemic.

“Together, these services will allow us to support a wider spectrum of innovative firms, from early stage proof of concept development in the digital sandbox, to testing new products or services with consumers in the regulatory sandbox.

“As a regulator we recognise the need to continually experiment and learn in order to stimulate innovation. We are excited to launch this new service and by the lessons it will provide for future iterations of the initiative.”

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