FCA to foster fintech innovation; Treasury pushes P2P, APIs and virtual currency
30 May 2014 | 14917 views | 1
The Financial Conduct Authority is looking to foster innovation in the UK financial services industry by setting up a policy hub to provide guidance to firms on new products and technology developments and an 'incubator' to fast-track startup businesses for regulatory authorisation.
The watchdog has launched a new programme, dubbed Project Innovate, with the aim of ensuring that positive developments in areas such as mobile banking, online investment or money transfer, are supported by the regulatory environment.
Outlining the approach at a conference hosted by Bloomberg on Thursday, FCA chief Martin Wheatley, pointed to the booming tech scene in London and the emergence of firms such as WorldRemit, Monitise, TransferWise, Nutmeg as evidence of a new wave of innovation in financial services
"What has become increasingly obvious, as the dust settles on this latest wave of progress, is that it's an imperative for regulators to be standing on the right side of progress," he says. "We want an FCA that creates room for the brightest and most innovative companies to enter the sector. The possibilities opening up for consumers are extraordinary - and it's clearly important they can be developed in the UK."
To help this happen, he says, the FCA is opening its doors to financial service firms who are developing innovative approaches that aren't explicitly addressed by current regulation - or where the guidance may be ambivalent.
This engagement has already begun with a number of start-ups, as well as organisations like Tech City UK and Level 39, coming in to talk to FCA policy teams.
The next step entails the creation of a scoping document exploring how innovation can be supported more effectively, focusing on the FCA's expectations of firms, as well as specifics around advice and support for businesses bringing new models of financial service to market.
In the meantime, the watchdog intends to open up a dedicated 'hub' in its policy team which will pull together FCA expertise to support the innovation ecosystem.
It will achieve this in two ways, say Wheatley: "First, by providing help to firms who are developing new models or products advice on compliance so they can navigate the regulatory system. Second, by looking for areas where the system itself needs to adapt to new technology or broader change - rather than the other way round."
On top of this, he says, the regulator will also be launching "an incubator to support innovative, small financial businesses as they ready themselves for regulatory authorisation".
The FCA's initiative comes as the UK Government re-affirmed its committment to breaking down barriers to entry for firms using innovative products and technology to challenge the established banking industry. This includes encouragement of peer-to-peer lending, opening up access to SME data and commissioning a feasibility study into the use of APIs for providing third party access to bank data.
HM Treasury says it also intends to address concerns about the application of the Money Laundering Regulations by banks, and in particular their use in denying access to banking services by firms trading in virtual currencies. To this end it convened a Private Sector Consultative Forum in March with banks, firms, regulators and FATF member governments to "enable a better understanding (of) the risks from virtual currencies and how these might be mitigated, including by banks".