While noting that the FCA sandbox was a global innovation when it was first introduced, Reynolds stated that “we now need to move to the next level of innovation [in the UK] to remove the straitjacket of statutory rules.”

Reynolds also calls for removal of the “blankets of inherited EU law so that the system is able to operate at its best - as the global gold standard, protecting consumers from their assets worldwide when using UK based financial services virtually.”

“We should only legislate or regulate for identifiable problems. We can move quickly to produce new regulations as the market develops to deal with a new problem, but we shouldn't have a Cartesian approach of trying to provide a blanket of law regulation for a sector, in advance of it developing.”

Balancing innovation with consumer protection

Reynolds added that there must also be a focus on weeding out misbehaviour and fraud, as well as systemic risk, which in his view, is best achieved through the common law approach of regulating where necessary, imposing higher standards with fewer rules, and regulatory predictability.

This “will prove, in my view to be the globally leading methods over time.”

He furthered that a few adjustments will be required post Brexit, including a more rigorously controlled approach to principles-based regulation, a technique involving what are currently vague regulator rules, including the role of treating customers fairly, which can lead to a lack of predictability, even though the UK regulators always behave reasonably.

Continuing on this question of protection for retail consumers, Clara KL Chiu, director of licensing and head of fintech unit intermediaries, Hong Kong Securities and Futures Commission added that regulators currently place investor protection as their working party.

Despite trying their best to educate investors so that they can avoid scams and know more about the features and risk before investing, Chiu noted that the fintech world, “is always full of excellent ideas, amazing technology and ‘once in a lifetime’ investment opportunity. As this is the case, investors should maintain accessibility in this bustling investment road and be receptive to regulators’ warnings and messages.”

She explained that regulators can always design and implement regulations with varying mechanism to protect specific sets of investors, but this presents a conflict between retail investors who see certain protections as a means of depriving access to products and service, and regulators who see this as necessary protection the customer.

“When the relevant product and service is more mature and developed our regulatory requirements will be varied, and those products and services could then be made available to retail investors as well.”

Navigating turbulence across fintech

Referring to the recent high-profile failures of Wirecard and Greensill, moderator Kay Swinburne, vice chair of financial services at KPMG, questioned the panel as to whether such events have impacted trust and trustworthiness of the fintech sector as a whole.

Reynolds doesn’t believe so.

“I don't think there's anything on a macro level to be troubled by as there will always be fraudulent operators, charlatans and businesses that fail, in any parts of any sector. The key is to make sure that those are dealt with properly and safely.”

Rather, he noted that WireCard and Greensill are two examples of how market participants can go awry, and what can be ensured is a transparent system which weeds out problems quickly through publicity.

“The regulatory cover up at Wirecard is a concerning example of exactly what not to do, and it's a cautionary tale about the dangers of a system where there's too much deference to a closely knit regulatory authority.”

There are lessons to be learned from these sagas, furthered Mark Adam, senior executive leader, strategic intelligence, ASIC, noting that regulators need to learn from these collapses, failures or withdrawals from the market for what it can tell us.

“Collapses and failures are a good, sane, reminder for everyone that they need to be conscious of that. As regulators, we need to bring to bear an open mind to all forms of innovation, but also a sceptical mind about business models as well.”

On top of this, Adams argued that regulators must pay attention to the perimeter, adding that regtech will have a relevance here to focus and alleviate risks eventuating in actual business models.

Regulators as fintech supporters

Extending on the role that regulators - specifically the FCA, plays in supporting innovation, Alex Roy, head of department, consumer distribution policy, FCA, must assess the problem looking to be tackled and the nature of solutions desired.

“As a regulator, we see problems with the unfamiliar by nature. But I think it's really important that we focus on real risk not imagined risk.

The way that the FCA has tried to manage this is by better understanding firms. Roy explained that this is approached by getting together with the firms - allowing limited permissions, allowing testing in a real environment, getting firms into the market and actually understanding what happens in practice when the firm meets consumers, what risks emerge, what's the right regulation to match that risk.

“Over time, we can then get the firm into the market with proper permissions, the right regulation, and then working with the firm over time to make sure that as they as they get settled into the market, they're bringing themselves up to where they need to be to meet the regulatory requirements.”

“That's about partnership and making sure that we keep focused on the real problems. I think that that for us is the absolutely critical thing - helping firms enter safely.”

Luciano Brincat, senior manager strategy policy & innovation, Malta Financial Services Authority, concluded that “it’s about dialogue, providing the necessary spaces for innovators to operate, and providing legal certainty […] Ultimately I believe that it's important that the sector, given that it's global in nature, has to collaborate together. This is so that we can achieve a regulatory environment which is conducive towards financial innovation at a global level, especially as fintechs are not bound by national borders, and operate in many jurisdictions, even across the globe.”