Consultation paper on draft innovation policy for financial services

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Background

The federal government announced with its Productivity Plan 2015 that departments will likely be required to make use of regulators to write innovation plans by spring 2016. This announcement reflects the key government try to make sure the UK is giving support to the growth of home based business models and disruptive technologies, breaking down barriers to entry and boosting productivity. For this the UK’s regulation and enforcement frameworks needs to be agile adequate to respond flexibly to continuing developments in new technologies and business that is disruptive.

The purpose of this consultation is always 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 regarding the financial services regulators: Financial Conduct Authority (FCA ), Payment Systems Regulator (PSR ), Prudential Regulation Authority (PRA ) additionally 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 financial services regulators are better utilising new technologies to build efficiency savings and lower burdens on business

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This consultation invites comment on the job of financial services regulators to support innovative technology and disruptive business models. We might also prefer to understand where there could be gaps in regulatory approach when it comes to innovation that is supporting.

Draft innovation arrange for financial services

2.1 Innovation and regulation

The vision that is government’s for UK financial services to function as the most acceptable and innovative on earth, delivering greater choice and value for consumers.

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

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

2.2 How new technology is shaping financial services

An integral focus of innovation in financial services in recent years could be the development of fintech – technology solutions which deliver financial services, often in a more efficient and customer-focused way. For example, technology has enabled:

• consumers in order to make payments via their smartphones
• the matching of consumers and businesses with money to truly save and invest with those that have to borrow
• personal insurance pricing in line with 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 dealing with incumbents to deliver more innovative services and products 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 aspects of financial services – for instance, payments, peer-to-peer lending, big data analytics and robo-advice – and also the prospect of technology to change financial services is substantial. 25% of all of the fintechs globally are in the retail payments industry 1 )

The united kingdom is the world-leader in fintech. An report that is independent Ernst and Young (EY) published in February ranked the united kingdom once 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 plans to support and promote innovation, facilitating the development of new technologies and business that is disruptive in financial services.

The government’s priority would be to ensure that regulation is proportionate and promotes innovation, in the place of constrains or inhibits it. Indeed there are likely to be some regions of existing regulation, developed well before digital and advances that are technological which could now be acting as a barrier to innovation.

2.4 Financial Conduct Authority (FCA )

Project Innovate

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

Part of Project Innovate could be the Innovation Hub which helps new and established businesses (both regulated and non-regulated) introduce innovative lending options and services into the market. The Innovation Hub also identifies areas where the framework that is regulatory to adapt to enable further innovation within the interests of consumers.

To date, Project Innovate has helped over 250 firms, 18 of which have been authorised to undertake regulated activities. It provides an experience that is end-to-end new entrants. Firms that receive initial support through the Innovation Hub have their applications for authorisation handled pay someone to write my paper via a specialised Project authorisation process that is innovate.

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

Great britain attracts fintech innovators from about the planet – many decide to base themselves into the UK, not just to engage in an exciting local ecosystem, but also since they see the UK as a springboard to launch their businesses or products internationally and bolster their competitiveness.

As an element of this work the FCA :

• Helps put UK-based innovators in contact with the right regulators when they check out start conducting 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. As an 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 methods to international standard-setters

Other initiatives to aid innovation and competition

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

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

Additionally, it is taking a look at amending its Handbook to remove a wide range of disclosure requirements which have not been as potent 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 has long been considered a barrier to entry for brand new banks, e-money issuers as well as other payments institutions, because of 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 recognize where in fact the barriers to innovation exist, which feeds to the PSR ’s policy development and implementation.

Competitive innovation

This consists of publishing reports that are annual assess each scheme’s compliance, which include 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 interim findings for both reviews were published in February and March ahead of the final reports later in 2010. Based on its findings, the PSR may implement remedies or undertake further policy strive to support innovation that is competitive.

Collaborative innovation

Following engagement with all the wider payments community, the Forum developed its initial pair of priority areas. This includes:

• Greater control and assurance for end users
• Simplifying access to market for payment services providers
• An evaluation of how industry can work to detect and reduce financial crime
• An assessment regarding the costs and advantages of account number portability