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The federal government announced in its Productivity Plan 2015 that departments will be expected to work with regulators to publish innovation plans by spring 2016. This announcement reflects the main element government try to make sure the UK is giving support to the growth of new business models and disruptive technologies, breaking down barriers to entry and boosting productivity. To achieve this the UK’s regulation and enforcement frameworks must certanly be agile adequate to respond flexibly to continuing developments in new technologies and disruptive business models.
The purpose of this consultation is always to put down ongoing and work that is proposed foster a supportive regulatory framework for financial services that enables innovation to flourish.
The innovation plan covers the job associated with the financial services regulators: Financial Conduct Authority (FCA ), Payment Systems Regulator (PSR ), Prudential Regulation Authority (PRA ) while the wider Bank of England.
The innovation plan covers three key issues:
- How technology that is new 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 create efficiency savings and reduce burdens on business
This consultation invites comment on the job of financial services regulators to support innovative technology and disruptive business models. We would also like to understand where there can be gaps in regulatory approach with regards to supporting innovation.
Draft innovation plan for financial services
2.1 Innovation and regulation
The government’s vision is for UK financial services to be the most acceptable and innovative in the world, delivering greater choice and value for consumers.
The federal government has recently taken significant action to reach this vision. This includes:
Creating the right environment that is regulatory particularly important to make certain that innovative firms can compete and grow. For this end, HM Treasury has firmly embedded competition and innovation objectives into the regulatory landscape for financial services through the primary regulators’ objectives and remits.
2.2 How technology that is new shaping financial services
An integral 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 way that is customer-focused. For instance, technology has enabled:
- consumers to produce payments via their smartphones
- the matching of consumers and businesses with money to save and invest with those that need to borrow
- personal insurance pricing on the basis of the characteristics and behaviours of individual consumers
- the introduction of new digital currencies
The services that are financial is characterised by both new disruptive players and fintechs working with incumbents to deliver 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 a lot of regions of financial services – for instance, payments, peer-to-peer lending, big data analytics and robo-advice – and the prospect of technology to change financial services is substantial. 25% of most fintechs globally this article have been in the retail payments industry 1 )
Great britain could 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 section outlines how each financial services regulator plans to support and promote innovation, facilitating the development of new technologies and business that is disruptive in financial services.
The government’s priority is always to make certain that regulation is proportionate and promotes innovation, rather than constrains or inhibits it. Indeed there are likely to be some regions of existing regulation, developed well before digital and technological advances, that might now be acting as a barrier to innovation.
2.4 Financial Conduct Authority (FCA )
It helps innovative firms get access to fast and feedback that is frank the regulatory implications of these concepts, plans and choices. It seeks to tackle the issues that are structural impede the progress of innovators going into the market.
Element of Project Innovate could be the Innovation Hub that will help new and businesses that are establishedboth regulated and non-regulated) introduce innovative financial products and services to your market. The Innovation Hub also identifies places where the regulatory framework needs to conform to enable further innovation when you look at 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 provides an experience that is end-to-end new entrants. Firms that receive initial support from the Innovation Hub have their applications for authorisation handled via a specialised Project Innovate authorisation process.
- working with government on its plans to introduce anti-money laundering regulation for digital currency exchanges, to offer a supportive environment for legitimate digital currency users and businesses, and create a hostile environment for illicit users
- making a statement taking a look at the extent regarding the dilemma of disproportionate de-risking, which denies businesses access to banking facilities, and how the FCA might influence firms to take a more proportionate approach
- using informal steers on proposed innovations to enable more communication that is direct firms
The UK attracts fintech innovators from about the world – many decide to base themselves into the UK, not just to engage in a captivating ecosystem that is local but in addition 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 contact with the best regulators when they look to start conducting business in other regulatory jurisdictions
- Stand prepared to help non-UK innovators interested in going into the UK market
- Seeks co-operation agreements with key regulators. For instance, the FCA recently signed a world-first Co-operation Agreement aided by the Australian regulator, ASIC, to facilitate the referral of innovative firms between their respective innovation hubs
- Promotes pro-innovation regulatory answers to international standard-setters
Other initiatives to guide competition and innovation
The guidance is designed to dispel misconceptions about regulators’ opposition to your encourage and cloud innovation in this region.
It is designed to encourage greater usage of behavioural and technology insights to supply communications which help people make effective decisions about services and products. The FCA is invested in working with 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.
Additionally it is looking at amending its Handbook to get rid of a quantity of disclosure requirements which have not been as potent as initially envisaged with regards to providing information that is appropriate consumers.
2.5 Payment Systems Regulator (PSR )
Usage of payment systems is an important driver of competition and innovation in the provision of payment services. Limited access has long been considered a barrier to entry for brand new banks, e-money issuers as well as other payments institutions, using the concern that the pace of innovation in this certain area is too slow.
A main objective is to exert effort proactively with small payments institutions and fintech firms to spot where in actuality the barriers to innovation exist, which feeds in to the PSR ’s policy development and implementation.
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.
To make sure that the marketplace is operating in a fashion that supports competitive innovation, the PSR is conducting two market reviews:
The interim findings for both reviews were published in February and March ahead of the final reports later this season. Dependent on its findings, the PSR may implement remedies or undertake further policy work to support competitive innovation.
Following engagement with all the wider payments community, the Forum developed its initial collection of priority areas. This can include:
- Greater control and assurance for end users
- Simplifying access to marketplace for payment services providers
- An evaluation of how industry can work to detect and minimize financial crime
- An assessment for the costs and great things about account number portability