This regulatory sandbox is established to enable more efficient SME lending and supporting the development of digital ID in the financial sector, specifically aiming at consumers and SMEs. In the field of financial services and markets, secure and reliable digital ID is a significant growth area of innovation, and will be a key part of the infrastructure that allows truly Open Finance, with consumers able to share their data with third party providers smoothly and securely, fuelling choice and competition in the market. The FCA’s interest in this technology lies in the systems and controls put in place by firms who provide and use digital ID due to its impact on the market. The growth in digital financial transitions requires a better understanding of how individuals are being identified and verified to ensure secure transactions and prevent financial crime activities. The duration of this sandbox ranges from six months to two years. Since its first cohort in 2016, the Regulatory Sandbox in the FCA’s Innovation Division has supported 14 digital ID models. For example, Fractal established a platform that facilitates SME financing and securitisation of SME debt, by digitising credit applications and connecting loan issuances to the underlying financial data, using distributed ledger technology (DLT) and artificial intelligence technology. The sandbox, with the goal of providing digital ID to the unbanked, can help financially excluded people establish digital IDs based on alternative identity evidence (e.g. geolocation data or registration of trusted referees such as a charity). Furthermore, by implementing the sandbox, FCA found ways to reduce human error, improve audit trail, lower costs, reduce friction points and address lack of interoperability standards for digital ID systems.