Consultation paper on draft innovation plan for financial services

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The government announced with its Productivity Plan 2015 that departments will undoubtedly be needed to make use of regulators to write innovation plans by spring 2016. This announcement reflects the important thing government make an effort to make sure the UK is giving support to the development of new business models and disruptive technologies, breaking down barriers to entry and productivity that is boosting. For this the UK’s regulation and enforcement frameworks must be agile adequate to respond flexibly to continuing developments in new technologies and disruptive business models.

The purpose of this consultation is 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 work associated with services that are financial: Financial Conduct Authority (FCA ), Payment Systems Regulator (PSR ), Prudential Regulation Authority (PRA ) while the wider Bank of England.

The innovation plan covers three issues that are key

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

This consultation invites comment on the task of financial services regulators to aid innovative technology and disruptive business models. We might also love to understand where there can be gaps in regulatory approach in terms of innovation that is supporting.

Draft innovation arrange for financial services

2.1 Innovation and regulation

The government’s vision is for UK financial services to end up being the most acceptable and innovative in the field, delivering greater choice and value for consumers.

The government has recently taken significant action to reach this vision. This consists of:

Creating the right regulatory environment is particularly vital that you ensure that innovative firms can compete and grow. To the end, HM Treasury has firmly embedded competition and innovation objectives into the landscape that is regulatory financial services through the main regulators’ objectives and remits.

2.2 How new technology is shaping financial services

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

  • consumers in order to make 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 in line with the characteristics and behaviours of individual consumers
  • the development of new digital currencies

The services that are financial is characterised by both new disruptive players and fintechs dealing 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 areas of financial services – for instance, payments, peer-to-peer lending, big data analytics and robo-advice – and also the possibility of technology to change financial services is substantial. 25% of all of the fintechs globally are in the retail payments industry 1 )

Great britain may be the world-leader in fintech. An report that is independent Ernst and Young (EY) published in February ranked the united kingdom because the leading fintech centre on the planet – 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 introduction of new technologies and business that is disruptive in financial services.

The government’s priority would be to make sure that regulation is proportionate and promotes innovation, in the place of constrains or inhibits it. Indeed you can find probably be some areas of existing regulation, developed long before digital and advances that are technological that 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 the concepts, plans and choices. It also seeks to tackle the structural conditions that impede the progress of innovators going into the market.

Part of Project Innovate may be the Innovation Hub that will help new and businesses that are establishedboth regulated and non-regulated) introduce innovative financial loans and services into the market. The Innovation Hub also identifies places where the framework that is regulatory to adjust to enable further innovation within 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 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 authorisation process that is innovate.

  • working with government on its intends 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 associated with the problem of disproportionate de-risking, which denies businesses access to banking facilities, and just how the FCA might influence firms to take a far more approach that is proportionate
  • using informal steers on proposed innovations to enable more communication that is direct firms

The united kingdom attracts fintech innovators from around the planet – many decide to base themselves in the UK, not only to be part of a captivating local ecosystem, but also because they look at 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 just the right regulators once they aim to start doing business in 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 world-first Co-operation Agreement utilizing 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 cloud and encourage innovation in this region.

It aims to encourage greater usage of behavioural and technology insights to deliver communications which help people make effective decisions about services and products. The FCA is dedicated to working together with industry where a notion has strong potential to enhance consumer outcomes; the FCA may consider waiving or modifying disclosure rules 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 effective 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 is definitely considered a barrier to entry for new banks, e-money issuers along with other payments institutions, using the concern that the pace of innovation in this area is too slow.

A objective that is main to get results proactively with small payments institutions and fintech firms to spot where the barriers to innovation exist, which feeds into the PSR ’s policy development and implementation.

Competitive innovation

This consists of 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 regulatory action if improvements are not made.

To ensure that the market is operating in a fashion that supports competitive innovation, the PSR is conducting two market reviews:

The findings that are interim both reviews were published in February and March prior to the final reports later this season. Depending on 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 initial collection of priority areas. This consists of:

  • Greater control and assurance for end users
  • Simplifying usage of marketplace for payment services providers
  • An assessment of how industry could work to detect and reduce crime that is financial
  • An assessment associated with costs and benefits of account number portability