FCA to extend Innovation Hub; advance research into blockchain tech
24 February 2016 | 10535 views | 0
The Financial Conduct Authority has so far had 413 fintech startups apply to its Innovation Hub scheme, providing support and advice to 52% of these budding businesses as they bid to break into the UK's financial technology market.
The FCA opened the Hub in October to help speed the licensing of new challenger banks and provide help to new entrants to understand the regulatory framework and how it applies.
In a speech in London on Tuesday, the watchdog's director of strategy and competition, Christopher Woolard, says it plans to expand the scheme over the coming year to provide end-to-end support to startups who make the grade by providing dedicated supervisory input for the first 12 months following authorisation.
Woolard says the early engagement model is providing a positive feedback loop between innovative companies and the regulator, as both learn from each other.
He points to the FCA's briefings with robo-advisory startup WealthKernel as a prime example.
"The Innovation Hub helped with their thinking before authorisation and they are currently going through that process now," he says. "At the same time we were able to explore the pros and cons of automated advice with comparison to the US market where this has gained a huge amount of traction and WealthKernel was able to play a role in our robo-advice forum. Engaging early on was as much as a discovery journey for us as it was for them."
He says the FCA is currently recording a 30% conversion rate from the first wave of firms who applied to the Hub, with 18 getting the green light and 21 going through the authorisation process.
Over the coming year, the FCA intends to step up its dialogue with regulators in overseas markets, beginning in Australia, with the aim of drawing up co-operation agreements to reduce some of the barriers to UK authorised firms looking to grow scale overseas and to assist non-UK innovators interested in entering the UK market.
The discussion, inevitably, turned to the application of distributed ledger technology in financial service, with Woolard setting out some of the regulatory and consumer issues that will need to be discussed as the technology evolves.
"For example, how individuals gain access to a distributed network and who controls this process, along with what data security exists for users are vital considerations for us as a regulator," he says. "The FCA continues to monitor the development of this technology but is yet to take a stance until its application is clearer."
He says the FCA is particularly interested in exploring whether blockchain technology can help firms meet know your customer or anti-money laundering requirements more efficiently and effectively, concluding: "We are engaged in discussions with government and industry on this issue."