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The us government announced in its Productivity Plan 2015 that departments is likely to be required to make use of regulators to create innovation plans by spring 2016. This announcement reflects the key government aim to make sure the UK is supporting 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 must certanly be agile enough to respond flexibly to continuing developments in new technologies and disruptive business models.
The objective of this consultation is to put down ongoing and proposed work to foster a supportive regulatory buy essay framework for financial services that allows innovation to flourish.
The innovation plan covers the job associated with services that are financial: Financial Conduct Authority (FCA ), Payment Systems Regulator (PSR ), Prudential Regulation Authority (PRA ) as well as the wider Bank of England.
The innovation plan covers three issues that are key
- How new technology is shaping financial services
- How financial services regulators are adapting to new technologies and business that is disruptive 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 touch upon the work of financial services regulators to support technology that is innovative disruptive business models. We would also prefer to understand where there might be gaps in regulatory approach with regards to innovation that is supporting.
Draft innovation plan 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 already taken action that is significant reach this vision. This includes:
Creating the best environment that is regulatory particularly crucial that you make sure innovative firms can compete and grow. For this end, HM Treasury has firmly embedded competition and innovation objectives in the landscape that is regulatory financial services through the primary regulators’ objectives and remits.
2.2 How technology that is new shaping financial services
An integral focus of innovation in financial services in the last few years may be the growth of fintech – technology solutions which deliver financial services, often in an even more efficient and way that is customer-focused. As an example, technology has enabled:
- consumers which will make payments via their smartphones
- the matching of consumers and businesses with money to save lots of and invest with those who need to borrow
- personal insurance pricing in line with the characteristics and behaviours of individual consumers
- the introduction of new digital currencies
The financial services sector is characterised by both new disruptive players and fintechs working together with incumbents to provide more innovative services and products through existing networks and infrastructure.
The sector that is fintech diverse: from small dynamic start-ups to more established players. Fintechs operate in a lot of areas of financial services – for example, payments, peer-to-peer lending, big data analytics and robo-advice – and the possibility of technology to change financial services is substantial. 25% of all of the fintechs globally have been in the retail payments industry 1 .
Great britain 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 disruptive business models to encourage growth
This section outlines how each financial services regulator intends to support and promote innovation, facilitating the development of new technologies and disruptive business models in financial services.
The government’s priority is always to make sure that regulation is proportionate and promotes innovation, as opposed to constrains or inhibits it. Indeed there are apt to be some regions of existing regulation, developed long before digital and advances that are technological which may now be acting as a barrier to innovation.
2.4 Financial Conduct Authority (FCA )
It can help innovative firms gain access to fast and frank feedback on the regulatory implications of their concepts, plans and choices. Moreover it seeks to tackle the structural issues that impede the progress of innovators going into the market.
Element of Project Innovate may be the Innovation Hub which helps new and established businesses (both regulated and non-regulated) introduce innovative financial products and services to the market. The Innovation Hub also identifies areas where the framework that is regulatory to adapt to enable further innovation in the interests of consumers.
To date, Project Innovate has helped over 250 firms, 18 of which have been 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.
- dealing with government on its intends to introduce anti-money laundering regulation for digital currency exchanges, to provide 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 for the dilemma of disproportionate de-risking, which denies businesses use of banking facilities, and how the FCA might influence firms to take a 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 choose to base themselves when you look at the UK, not only to be part of a vibrant ecosystem that is local but additionally since 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 best 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 using the Australian regulator, ASIC, to facilitate the referral of innovative firms between their respective innovation hubs
- Promotes pro-innovation regulatory methods to standard-setters that are international
Other initiatives to support competition and innovation
The guidance is designed to dispel misconceptions about regulators’ opposition towards the cloud and encourage innovation in this region.
It is designed to encourage greater use of behavioural and technology insights to supply communications that help people make effective decisions about services and products. The FCA is devoted to using the services of industry where a thought has strong potential to improve consumer outcomes; the FCA may consider waiving or disclosure that is modifying where appropriate to facilitate this testing.
It’s also looking at amending its Handbook to remove a wide range 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 in the provision of payment services. Limited access is certainly considered a barrier to entry for new banks, e-money issuers as well as other payments institutions, with the concern that the pace of innovation in this certain area is simply too slow.
A main objective is to exert effort proactively with small payments institutions and fintech firms to recognize where the barriers to innovation exist, which feeds in to the PSR ’s policy development and implementation.
This includes 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 that the marketplace 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 before the final reports later this year. Based on its findings, the PSR may implement remedies or undertake further policy work to support innovation that is competitive.
Following engagement with all the wider payments community, the Forum developed its initial pair of priority areas. This consists of:
- Greater assurance and control for end users
- Simplifying use of market for payment services providers
- An evaluation of how industry can perhaps work to detect and minimize financial crime
- An evaluation associated with costs and benefits of account number portability