About a-team Marketing Services
The knowledge platform for the financial technology industry
The knowledge platform for the financial technology industry

A-Team Insight Blogs

FCA Highlights ‘Underserviced’ RegTech Sector in Latest Innovation Initiative

Subscribe to our newsletter

RegTech is the “sleeping giant” of the financial services world, according to FCA Director of Innovation Nick Cook, who notes that while investments in the sector more than doubled between 2017 (in excess of £1.4 billion) and 2018 (in excess of £3.4 billion), several key challenges are still inhibiting the industry from reaching its full potential.

“RegTech, has been, in my opinion, a key ‘underserviced’ area of the Sandbox until now and another area where we have to think if the services we currently offer marry up to the needs of firms,” Cook said at the Chief Data Officer Exchange Financial Services conference in London last week.

A key struggle for RegTech solutions is making the step from Proof of Concept to Proof of Value – being able to demonstrate a compelling business case to potential users, develop trust in the solution, and justify the security, procurement risk and cost requirements that implementation might involve.

Another issue is the lack of access to high-quality synthetic data assets against which to test new technology solutions. The FCA currently exploring possibilities around a digital testing environment, what role it might be able to play in supporting its creation, and whether it could be scaled across multiple jurisdictions.

The regulator’s five-year old innovation initiative – including its Digital Sandbox, TechSprints, an advice unit and direct support – has already helped around 700 firms, while out of the 47 that have completed sandbox testing around 80% are now in commercial operation with another 60 in the pipeline. However, the regulator has expressed concern that while in some areas such as retail banking the Sandbox has been very successful, other sectors – such as asset management – have seen significantly fewer offerings, while no participant has yet managed to create “true disruption” at scale, and big/mid-size players are not yet using the Sandbox in the same way as the smaller start-ups.

The FCA therefore wants to broaden the variety coming into its Sandbox, in particular is by encouraging developments in certain areas of regulatory interest to create “desirable” outcomes. Cohort 6, which opened just a few weeks ago, specifically targets the use of technology to overcome regulatory challenges.

The regulator has also expressed interest in developing the potential of two specific areas of new technology.

The first, ‘federated learning’ or ‘travelling algorithms’, potentially allows entities to develop and refine more “performant” algorithms, which are trained on multiple data assets without bringing those assets together.

The second area is ‘complex scenario modelling and scenario simulation’, which uses graph analytics, behavioural science and deep learning to model relationships, connections and behaviours in financial markets, which can then be tested against various simulations and scenarios. The technology in theory could be used to help regulators better understand the impact of planned policy interventions, while it could also assist firms to ensure their products do not present any unintended risks to their clients.

“In this age of rapidly developing and accelerating change in financial services, it’s important for regulators to understand that technology is both the architect of, but also the solution to, the new challenges we face,” stressed Cook. “We must embrace innovation in order to shape it.”

Subscribe to our newsletter

Related content

WEBINAR

Recorded Webinar: Are Your Legacy Voice Recordings a Compliance Time Bomb?

Recent enforcement actions underscore the importance of maintaining accurate, secure and up-to-date voice and electronic communication. For some organisations, legacy voice recording systems are not at or beyond end-of-life, posing significant compliance, operational and financial risks. These outdated systems often fail to meet evolving regulatory expectations around data authenticity, retention, and accessibility. Delaying action increases...

BLOG

AI in Capital Markets Summit NYC 2025: Seats Filling Fast – Book Now

Following a successful second event in London, the AI in Capital Markets Summit (AICMS) arrives in New York City for the first time on June 26, 2025, to advance the critical industry conversation about artificial intelligence – from experimentation to production. Hosted by A-Team Group at @Ease on Third Avenue, this timely event is a...

EVENT

Data Management Summit New York City

Now in its 15th year the Data Management Summit NYC brings together the North American data management community to explore how data strategy is evolving to drive business outcomes and speed to market in changing times.

GUIDE

AI in Capital Markets: Practical Insight for a Transforming Industry – Free Handbook

AI is no longer on the horizon – it’s embedded in the infrastructure of modern capital markets. But separating real impact from inflated promises requires a grounded, practical understanding. The AI in Capital Markets Handbook 2025 provides exactly that. Designed for data-driven professionals across the trade life-cycle, compliance, infrastructure, and strategy, this handbook goes beyond...