FCA AI ‘sandboxing’ strategy a positive step for financial services

Luke Scanlon, fintech expert at Pinsent Masons, was commenting after the FCA unveiled a new initiative to accelerate financial sector AI innovation, announcing a strategic collaboration with tech giant Nvidia.

The partnership aims to empower firms to experiment with cutting-edge AI technologies in a controlled, supportive environment through the FCA’s newly enhanced ‘supercharged sandbox’.

The sandbox is designed to support early-stage AI, including prototypes and proofs of concept, by providing the technical and regulatory scaffolding needed to innovate responsibly. Firms accepted into the programme will be able to test their AI models in a live but safeguarded environment, with direct support from both the FCA and Nvidia.

The initiative is open to all financial services firms aiming to addressing real-world challenges through AI. Applications are now being accepted, with live testing set to begin in October.

Scanlon said: “There are many reasons which would make it appealing in some circumstances for firms. While the regulator is not going so far as to provide any regulatory exemptions, the sandboxing approach is pragmatic and will enable firms to test use cases that may need to be implemented on a very short timescale over the coming 24 months.”

The initiative is part of the FCA’s broader ‘AI lab’ programme, which aims to foster safe, responsible and impactful AI adoption across UK financial markets. In tandem with the supercharged sandbox, the FCA is also launching ‘AI live testing’ – a regulatory-first approach that will allow firms to work closely with FCA supervisors while deploying AI models. This initiative is designed to bridge the gap between innovation and compliance, ensuring that AI tools are not only effective but also aligned with consumer protection and market integrity standards.

The FCA’s AI lab will serve as the central hub for these efforts, offering a collaborative platform for regulators, firms, and stakeholders to share insights, evaluate risks, and refine best practices. The AI lab also includes initiatives like an ‘AI spotlight’ digital showcase and a two-day in-person ‘AI sprint’ event with industry, academia and consumer groups, which aimed to deepen understanding of AI’s real-world applications and challenges.