Consultation paper on draft innovation policy for financial services
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The us government announced in its Productivity Plan 2015 that departments will soon be necessary to work with regulators to publish innovation plans by spring 2016. This announcement reflects the main element government make an effort 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 get this done the UK’s regulation and enforcement frameworks must be agile enough to respond flexibly to continuing developments in new technologies and business that is disruptive.
The goal of this consultation would be to lay out ongoing and work that is proposed foster a supportive regulatory framework for financial services that enables innovation to flourish.
The innovation plan covers the task associated with 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 services that are financial are better utilising new technologies to come up with efficiency savings and minimize burdens on business
This consultation invites comment on the task of financial services regulators to guide technology that is innovative disruptive business models. We would also like to understand where there could be gaps in regulatory approach in terms of supporting innovation.
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 the planet, delivering greater choice and value for consumers.
The government has already taken significant action to reach this vision. This consists of:
Creating the right environment that is regulatory particularly important to make sure that innovative firms can compete and grow. To this end, HM Treasury has firmly embedded competition and innovation objectives when you look at the landscape that is regulatory financial services through the key regulators’ objectives and remits.
2.2 How new technology is shaping financial services
A vital focus of innovation in financial services in recent years could be the growth of fintech – technology solutions which deliver financial services, often in a far more efficient and way that is customer-focused. For instance, technology has enabled:
- consumers to create payments via their smartphones
- the matching of consumers and businesses with money to truly save and invest with those that want to borrow
- personal insurance pricing based on 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 with incumbents to provide 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 regions of financial services – as an example, payments, peer-to-peer lending, big data analytics and robo-advice – plus the possibility of technology to change financial services is substantial. 25% of all fintechs globally have been in the retail payments industry 1 .
The UK may be the world-leader in fintech. An independent report from Ernst and Young (EY) published in February ranked the UK 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 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 business that is disruptive in financial services.
The government’s priority is to ensure that regulation is proportionate and promotes innovation, in the place of constrains or inhibits it. Indeed you will find probably be some areas 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 )
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 structural issues that impede the progress of innovators going into the market.
Part of Project Innovate is the Innovation Hub which helps 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 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 were authorised to undertake regulated activities. It gives 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.
- 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 create a hostile environment for illicit users
- making a statement studying the extent associated with problem of disproportionate de-risking, which denies businesses use of banking facilities, and exactly how the FCA might influence firms to take a far more proportionate approach
- using informal steers on proposed innovations to enable more communication that is direct firms
Great britain attracts fintech innovators from about the whole world – many decide to base themselves in the UK, not just to be part of an exciting local ecosystem, but also since 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 the best regulators when they look to 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. For instance, the FCA recently signed a co-operation that is world-first with 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 aid competition and innovation
The guidance is designed to dispel misconceptions about regulators’ opposition to your encourage and cloud innovation in this area.
It aims to encourage greater utilization of technology and behavioural insights to deliver communications which help people make effective decisions about services and products. The FCA is committed to dealing with industry where a thought 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 quantity of disclosure requirements which have not been as effective as initially envisaged with regards to 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 when you look at the provision of payment services. Limited access has long been considered a barrier to entry for new banks, e-money issuers along with other payments institutions, with all the concern that the pace of innovation in this area is just too slow.
A main objective is to function proactively with small payments institutions and fintech firms to determine where in actuality paper writer the barriers to innovation exist, which feeds in to the PSR ’s policy development and implementation.
This consists of publishing annual reports to 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 ensure the market is operating in a way that supports competitive innovation, the PSR is conducting two market reviews:
The findings that are interim both reviews were published in February and March ahead of the final reports later this current year. Depending on its findings, the PSR may implement remedies or undertake further policy work to support innovation that is competitive.
Following engagement utilizing the wider payments community, the Forum developed its set that is initial of 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 lower crime that is financial
- An evaluation of the costs and advantages of account number portability