The FCA regulates over 56,000 firms which employ over 2 million people in the UK. The financial services industry is obviously an important industry in UK’s economy given this statistic. This highlights the need for Fintech initiatives going forward (technology initiatives supporting or enabling the financial industry). One such initiative is Project Innovate. The initiative was developed back in 2014 to promote competition and growth in UK’s financial services industry. The initiative has been supporting small and large businesses which make new products and services that benefit customers genuinely. In the first year of operation, Project Innovate helped over 175 businesses. Currently, the project has helped over 358 businesses.
The latest FCA update on Fintech as of April 2017 focuses on a few main points. First and foremost, the FCA continues to tackle regulatory barriers to allow firms to continue innovating for the benefit of their clients. The FCA is doing so given the fact that the demand for its support is increasing. Project Innovate is also entering a new phase. As a forward-looking regulator, the FCA sees the need to continue evolving its approach. The FCA has seen an emergence of Fintech hubs in the UK and has reaffirmed its commitment to support these hubs by offering more/better local assistance.
The FCA’s approach to innovation
In an effort to highlight the importance of innovation in the financial services industry, the FCA continues to educate the public on why innovation is important. According to Christopher Woolard, the FCA’s Executive Director of Strategy and Competition, the FCA has an obligation to make UK’s financial services work well. To do this, the FCA continues to assess the integrity of financial markets and consumer protection issues. The FCA also has the duty to continue promoting the interest of consumers.
According to Woolard, the FCA is increasingly focused on using innovation to promote competition going forward. The FCA has completed its second round of testing innovative products/services, business models and well as delivery mechanisms in practice through its Regulatory Sandbox program. The FCA is also continuing to support technologies that will facilitate the delivery of regulatory requirements better than existing capabilities. The regulator has already held successful initiatives aimed at bringing market participants together to solve crucial problems in the financial services industry.
Priority areas going forward
The FCA is increasingly focused on expanding the scope of its Advice Unit which has been making automated advice models in the investment, pension and protection space. The FCA’s Advice Unit has a broader scope now. The unit is currently engaging the general insurance, mortgage, and debt sectors as well as many other firms that are keen on providing guidance, instead of advice. According to Woolard, the FCA will do more to spearhead the conversation about emerging innovations and trends. The regulator has already started a conversation about the risks and advantages of Distributed Ledger Technology.
The FCA also intends to take an international approach to innovation i.e. restarting its commitment to supporting innovation globally by signing cooperation agreements. The FCA has already signed such agreements with China, Hong Kong, Japan and Canada and is also working with other global regulators to foster a common understanding on good innovation. The regulator is working towards this via international bodies such as the IOSCO and the G20.
In early April 2017, the FCA hosted the first ever International Innovate Seminar featuring over 90 regulators from 56 countries globally.
According to Woolard, this will foster stronger international cooperation as well as help to secure the future of the industry in the long-term. Woolard, however, insists that the FCA is still focused more on supporting emerging Fintech hubs in the UK.
In his latest remarks, London has experienced the most Fintech emergence regionally. This emergence is however expected to spread beyond London. The FCA sees numerous exciting Fintech developments across the UK from Liverpool to Bristol which is why the regulator has promised to work with numerous organisations across the UK. The FCA is focusing on areas with a technological presence as well as strong financial centers. The FCA is also looking at areas where it has established strong relationships with local learning institutions like universities.
The regulator has mapped out the Leeds-Manchester and Edinburgh-Glasgow areas as promising emerging Fintech hubs and is focused on offering such areas the same access to regulatory support as key areas like London. The FCA is committed to ensuring good Fintech ideas in the financial services industry come to fruition regardless of where they are conceived.