Consultation paper on draft innovation arrange for financial services

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Background

The government announced in its Productivity Plan 2015 that departments is going to be expected to work with regulators to create innovation plans by spring 2016. This announcement reflects the important thing government try to ensure the UK is giving support to the development of new business models and disruptive technologies, breaking down barriers to entry and boosting productivity. To do this the UK’s regulation and enforcement frameworks needs to be agile enough to respond flexibly to continuing developments in new technologies and disruptive business models.

The purpose of this consultation would be to put down ongoing and proposed work to foster a supportive regulatory framework for financial services which allows innovation to flourish.

The innovation plan covers the task of this services that are financial: Financial Conduct Authority (FCA ), Payment Systems Regulator (PSR ), Prudential Regulation Authority (PRA ) as well as the wider Bank of England.

The innovation plan covers three issues that are key

• How new technology is shaping financial services
• How financial services regulators are adapting to new technologies and business that is disruptive to encourage growth
• How services that are financial are better utilising new technologies to come up with efficiency savings and minimize burdens on business

This consultation invites touch upon the task of financial services regulators to aid innovative technology and disruptive business models. We would also prefer to understand where there might be gaps in regulatory approach in terms of supporting innovation.

Draft innovation arrange for financial services

2.1 Innovation and regulation

The government’s vision is for UK financial services to be the most competitive and innovative on the planet, delivering greater choice and value for consumers.

The us government has already taken significant action to reach this vision. This can include:

Creating the best regulatory environment is particularly vital that you make sure that innovative firms can compete and grow. To this end, HM Treasury has firmly embedded competition and innovation objectives in the regulatory landscape for financial services through the primary regulators’ objectives and remits.

2.2 How technology that is new shaping financial services

A vital focus of innovation in financial services in modern times could be the development of fintech – technology solutions which deliver financial services, often in an even more efficient and customer-focused way. As an example, technology has enabled:

• consumers to make payments via their smartphones
• the matching of consumers and businesses with money to save lots of and invest with those that need certainly to borrow
• personal insurance pricing on the basis of the characteristics and behaviours of individual consumers
• the introduction of new currencies that are digital

The services that are financial is college students buying essays characterised by both new disruptive players and fintechs working together with incumbents to provide more innovative products and services through existing networks and infrastructure.

The fintech sector is diverse: from small dynamic start-ups to more established players. Fintechs operate in lots of aspects of financial services – as an example, payments, peer-to-peer lending, big data analytics and robo-advice – plus the potential for technology to change financial services is substantial. 25% of all fintechs globally come in the retail payments industry 1 .

The UK is the world-leader in fintech. An independent report from Ernst and Young (EY) published in February ranked the united kingdom as the leading fintech centre in the world – ahead of other leading hubs like Silicon Valley, New York and Hong Kong.

The UK’s fintech sector has been rap >2 that is growing .

2.3 How financial services regulators are adapting to new technologies and business that is disruptive to encourage growth

This section outlines how each financial services regulator intends to support and promote innovation, facilitating the introduction of new technologies and disruptive business models in financial services.

The government’s priority would be to make certain that regulation is proportionate and promotes innovation, rather than constrains or inhibits it. Indeed you can find apt to be some aspects of existing regulation, developed well before digital and advances that are technological which might now be acting as a barrier to innovation.

2.4 Financial Conduct Authority (FCA )

Project Innovate

It can help innovative firms get access to fast and feedback that is frank the regulatory implications of their concepts, plans and choices. In addition seeks to tackle the issues that are structural impede the progress of innovators entering the market.

Section of Project Innovate could be the Innovation Hub which helps new and established businesses (both regulated and non-regulated) introduce innovative financial products and services towards the market. The Innovation Hub also identifies areas where the regulatory framework needs to adjust to enable further innovation in the interests of consumers.

Up to now, Project Innovate has helped over 250 firms, 18 of that have been authorised to undertake regulated activities. It offers an end-to-end experience for new entrants. Firms that receive initial support through the Innovation Hub have their applications for authorisation handled via a specialised Project authorisation process that is innovate.

• dealing with government on its intends to introduce anti-money laundering regulation for digital currency exchanges, to give you a environment that is supportive legitimate digital currency users and businesses, and produce a hostile environment for illicit users
• making a statement looking at the extent of the issue of disproportionate de-risking, which denies businesses use of banking facilities, and exactly how the FCA might influence firms to take a more proportionate approach
• using informal steers on proposed innovations make it possible for more communication that is direct firms

Great britain attracts fintech innovators from about the planet – many choose to base themselves when you look at the UK, not just to engage in a vibrant ecosystem that is local but also since they begin to see the UK as a springboard to launch their businesses or products internationally and bolster their competitiveness.

The FCA as part of this work

• Helps put UK-based innovators in touch with the right regulators if they check out start business that is doing other regulatory jurisdictions
• Stand ready to help non-UK innovators interested in going into the UK market
• Seeks co-operation agreements with key regulators. For example, the FCA recently signed a world-first Co-operation Agreement with the Australian regulator, ASIC, to facilitate the referral of innovative firms between their respective innovation hubs
• Promotes pro-innovation regulatory answers to standard-setters that are international

Other initiatives to support innovation and competition

The guidance is designed to dispel misconceptions about regulators’ opposition to your encourage and cloud innovation in this region.

It aims to encourage greater utilization of technology and behavioural insights to supply communications that help people make effective decisions about services and products. The FCA is invested in using the services of industry where an idea has strong potential to boost consumer outcomes; the FCA may consider waiving or disclosure that is modifying where appropriate to facilitate this testing.

It is also taking a look at amending its Handbook to get rid of a number of disclosure requirements that have not been as potent as initially envisaged in terms of providing information that is appropriate consumers.

2.5 Payment Systems Regulator (PSR )

Use of payment systems is an driver that is important of and innovation into the provision of payment services. Limited access has long been considered a barrier to entry for brand new banks, e-money issuers along with other payments institutions, with the concern that the pace of innovation in this area is too slow.

A objective that is main to focus proactively with small payments institutions and fintech firms to recognize in which the barriers to innovation exist, which feeds to the PSR ’s policy development and implementation.

Competitive innovation

This includes publishing annual reports to assess each scheme’s compliance, which includes places where the PSR expects to see improvements. The PSR will consider further regulatory action if improvements are not made.

The PSR is conducting two market reviews to ensure that the market is operating in a way that supports competitive innovation

The findings that are interim both reviews were published in February and March prior to the final reports later this year. Based on its findings, the PSR may implement remedies or undertake further policy work to support competitive innovation.

Collaborative innovation

Following engagement using the wider payments community, the Forum developed its initial pair of priority areas. This consists of:

• Greater assurance and control for end users
• Simplifying use of marketplace for payment services providers
• An evaluation of how industry can work to detect and reduce crime that is financial
• An evaluation of this costs and advantages of account number portability