You will need to obtain permission from the copyright holders concerned where we have identified any third party copyright information.
Background
The government announced in its Productivity Plan 2015 that departments will undoubtedly be required to make use of regulators to create innovation plans by spring 2016. This announcement reflects the key government aim to make sure the UK is supporting the growth of home based business models and disruptive technologies, wearing down barriers to entry and boosting productivity. To work on this the UK’s regulation and enforcement frameworks should be agile adequate to respond flexibly to continuing developments in new technologies and disruptive business models.
The goal of this consultation would be to lay out ongoing and work that is proposed foster a supportive regulatory framework for financial services which allows innovation to flourish.
The innovation plan covers the task regarding the financial services regulators: Financial Conduct Authority (FCA ), Payment Systems Regulator (PSR ), Prudential Regulation Authority (PRA ) plus the wider Bank of England.
The innovation plan covers three key issues:
- 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 financial services regulators are better utilising new technologies to create efficiency savings and reduce burdens on business
This consultation invites comment on the job of financial services regulators to support technology that is innovative disruptive business models. We would also like to understand where there might be gaps in regulatory approach in terms of supporting innovation.
Draft innovation policy for financial services
2.1 Innovation and regulation
The government’s vision is for UK financial services to function as the most competitive and innovative on earth, delivering greater choice and value for consumers.
The government has already taken significant action to reach this vision. This includes:
Creating the right environment that is regulatory particularly vital that you make sure innovative firms can compete and grow. To this end, HM Treasury has firmly embedded competition and innovation objectives into the landscape that is regulatory 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 recent years may be the growth of fintech – technology solutions which deliver financial services, often in an even more efficient and way that is customer-focused. For instance, technology has enabled:
- consumers which will make payments via their smartphones
- the matching of consumers and businesses with money to save lots of and invest with those who need 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 characterised by both new disruptive players and fintechs working together with incumbents to deliver more innovative products and services through existing networks and infrastructure.
The sector that is fintech diverse: from small dynamic start-ups to more established players. Fintechs operate in many regions of financial services – as an example, payments, peer-to-peer lending, big data analytics and robo-advice – while the possibility of technology to transform financial services is substantial. 25% of most fintechs globally come in the payments that are retail 1 .
The UK may be the world-leader in fintech. An independent report from Ernst and Young (EY) published in February ranked great britain because 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 growing rap >2 .
2.3 How financial services regulators are adapting to new technologies and disruptive business models to encourage growth
This essay writer section outlines how each financial services regulator intends to support and promote innovation, facilitating the development of new technologies and business that is disruptive in financial services.
The government’s priority is to ensure that regulation is proportionate and promotes innovation, instead of constrains or inhibits it. Indeed you can find likely to be some areas of existing regulation, developed well before digital and technological advances, which might now be acting as a barrier to innovation.
2.4 Financial Conduct Authority (FCA )
Project Innovate
It can help innovative firms gain access to fast and feedback that is frank the regulatory implications of their concepts, plans and choices. In addition seeks to tackle the structural problems that impede the progress of innovators going into the market.
Part of Project Innovate is the Innovation Hub that will help 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 into the interests of consumers.
To date, Project Innovate has helped over 250 firms, 18 of which were authorised to undertake regulated activities. It provides 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.
- using the services of government on its plans to introduce anti-money laundering regulation for digital currency exchanges, to produce a environment that is supportive legitimate digital currency users and businesses, and create a hostile environment for illicit users
- making a statement studying the extent for the problem of disproportionate de-risking, which denies businesses access to banking facilities, and just how the FCA might influence firms to take a more approach that is proportionate
- using informal steers on proposed innovations to allow more communication that is direct firms
The UK attracts fintech innovators from about the world – many choose to base themselves when you look at the UK, not only to be part of a vibrant local ecosystem, but also simply because they see the UK as a springboard to launch their businesses or products internationally and bolster their competitiveness.
As part of this work the FCA :
- Helps put UK-based innovators in touch with the best regulators when they check out start business that is doing other regulatory jurisdictions
- Stand ready to help innovators that are non-UK in entering the UK market
- Seeks co-operation agreements with key regulators. For example, the FCA recently signed a co-operation that is world-first because of the Australian regulator, ASIC, to facilitate the referral of innovative firms between their respective innovation hubs
- Promotes pro-innovation regulatory solutions to international standard-setters
Other initiatives to guide innovation and competition
The guidance aims to dispel misconceptions about regulators’ opposition towards the encourage and cloud innovation in this area.
It aims to encourage greater use of behavioural and technology insights to deliver communications that help people make effective decisions about products and services. The FCA is devoted to dealing with industry where a thought has strong potential to improve consumer outcomes; the FCA may consider waiving or modifying disclosure rules where appropriate to facilitate this testing.
It’s also taking a look at amending its Handbook to remove an amount of disclosure requirements that have not been as effectual as initially envisaged in terms of providing appropriate information to consumers.
2.5 Payment Systems Regulator (PSR )
Use of payment systems is an important driver of competition and innovation in the provision of payment services. Limited access is certainly considered a barrier to entry for new banks, e-money issuers and other payments institutions, using the concern that the pace of innovation in this certain area is just too slow.
A objective that is main to work proactively with small payments institutions and fintech firms to recognize where the barriers to innovation exist, which feeds to the PSR ’s policy development and implementation.
Competitive innovation
This includes publishing reports that are annual assess each scheme’s compliance, which includes areas where the PSR expects to see improvements. The PSR will consider further action that is regulatory 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 before the final reports later in 2010. According to its findings, the PSR may implement remedies or undertake further policy strive to support competitive innovation.
Collaborative innovation
Following engagement with all the wider payments community, the Forum developed its set that is initial of areas. This consists of:
- Greater control and assurance for end users
- Simplifying use of market for payment services providers
- An assessment of how industry can perhaps work to detect and reduce financial crime
- An evaluation of the costs and great things about account number portability