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Background

The government announced with its Productivity Plan 2015 that departments is going to be needed to work with regulators to create innovation plans by spring 2016. This announcement reflects the key government aim to make sure the UK is supporting the development of home based business models and disruptive technologies, breaking down barriers to entry and productivity that is boosting. To work on this the UK’s regulation and enforcement frameworks must be agile adequate to respond flexibly to continuing developments in new technologies and business that is disruptive.

The objective of this consultation is always to set out ongoing and proposed work to foster a supportive regulatory framework for financial services that allows innovation to flourish.

The innovation plan covers the task for the financial services regulators: Financial Conduct Authority (FCA ), Payment Systems Regulator (PSR ), Prudential Regulation Authority (PRA ) in addition to 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 disruptive business models to encourage growth
• How financial services regulators are better utilising new technologies to build efficiency savings and minimize burdens on business

This consultation invites touch upon the task of financial services regulators to guide technology that is innovative disruptive business models. We would also like to understand where there can 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 government’s vision is for UK financial services to end up being the most competitive and innovative in the field, delivering greater choice and value for consumers.

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

Creating the proper regulatory environment is particularly crucial that you make sure innovative firms can compete and grow. To this end, HM Treasury has firmly embedded competition and innovation objectives when you look at the regulatory landscape for 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 the past few years could be the development of fintech – technology solutions which deliver financial services, often in an even more efficient and customer-focused way. For instance, 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 want to borrow
• personal insurance pricing based on 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 using the services of incumbents to deliver more innovative products and services through existing networks and infrastructure.

The sector that is fintech diverse: from small dynamic start-ups to more established players. Fintechs operate in lots 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 all fintechs globally are in the payments that are retail 1 )

Great britain could be the world-leader in fintech. An report that is independent Ernst and Young (EY) published in February ranked great britain 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 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 certain that regulation is proportionate and promotes innovation, instead of constrains or inhibits it. Indeed you can find likely to be some aspects 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 )

Project Innovate

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

Section 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 areas where the framework that is regulatory to conform to enable further innovation in the interests of consumers.

To date, Project Innovate has helped over 250 firms, 18 of which were authorised to undertake regulated activities. It offers an experience that is end-to-end new entrants. Firms that receive initial support through 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 present a environment that is supportive legitimate digital currency users and businesses, and produce a hostile environment for illicit users
• making a statement studying the extent for the problem of disproportionate de-risking, which denies businesses use of banking facilities, and just how the FCA might influence firms to take a more approach that is proportionate
• using informal steers on proposed innovations to allow more communication that is direct firms

The united kingdom attracts fintech innovators from around the planet – many decide to base themselves within the UK, not just to be part of a vibrant ecosystem that is local but additionally simply because they start 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 proper regulators once they look to start business that is doing other regulatory jurisdictions
• Stand ready to help innovators that are non-UK in going into the UK market
• Seeks co-operation agreements with key regulators. For instance, the FCA recently signed a co-operation that is world-first with all the Australian regulator, ASIC, to facilitate the referral of innovative firms between their respective innovation hubs
• Promotes pro-innovation regulatory answers to standard-setters that are international

Other initiatives to support innovation and competition

The guidance aims to dispel misconceptions about regulators’ opposition to the encourage and cloud innovation in this area.

It is designed to encourage greater usage of technology and behavioural insights to provide communications that help people make effective decisions about services and products. The FCA is dedicated to using the services of industry where a concept has strong potential to enhance consumer outcomes; the FCA may consider waiving or disclosure that is modifying where appropriate to facilitate this testing.

It’s also taking a look at amending its Handbook to remove an amount of disclosure requirements that have not been as effectual as initially envisaged with regards to providing information that is appropriate consumers.

2.5 Payment Systems Regulator (PSR )

Access to payment systems is an important driver of competition and innovation in the provision of payment services. Limited access is definitely considered a barrier to entry for brand new banks, e-money issuers and other payments institutions, with all the concern that the pace of innovation in this area is just 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 includes publishing reports that are annual assess each scheme’s compliance, which include places where the PSR expects to see improvements. The PSR try this web-site will consider further regulatory action if improvements are not made.

To make sure that 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 prior to the final reports later this season. Based on its findings, the PSR may implement remedies or undertake further policy work to support innovation that is competitive.

Collaborative innovation

Following engagement because of the wider payments community, the Forum developed its set that is initial of areas. This can include:

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