In his recent speech at the Innovate Finance Global Summit, Christopher Woolard, Executive Director of Strategy and Competition at the FCA, was very positive about the direction of travel the FCA’s Project Innovate is taking.
Mr Woolard highlighted that the demand from firms looking for support from the FCA is higher than ever and that applications from firms for the second round of the FCA’s regulatory sandbox programme, are greater than for the first round.
In this speech, he highlighted the FCA’s future plans in relation to innovations in the sector generally:
- continue to tackle regulatory barriers to innovation;
- work with international partners to develop common understanding of the principles of good innovation; and
- aim to spread the FCA’s services more nationally, through offering assistance to emerging FinTech hubs in Scotland and the Leeds/Manchester areas.
MEASURING SUCCESS
The FCA believes it is important that they measure the success of innovations in the sector, in order to determine progress and to see where improvements can be made. There are three measures they use to do this:
- Can they see more innovation firms entering the market?
- Is there greater innovation and competition by and between larger firms?
- Are consumers benefiting from new innovations and competition?
Ultimately, the FCA is focussed on consumer outcomes and seeing how they react to innovations. They are heartened that the number of consumers who can benefit from services offered by innovative firms have increased in the space of a year from tens of thousands to millions.
The FCA believes that progress in innovations is good, and in spite of Brexit, the UK continues to be remain an attractive place for innovative firms to invest.
FUTURE OPPORTUNITIES AND CHALLENGES
The FCA is continually looking at ways it can evolve and progress innovation, both nationally and internationally. On a national level, for example, its Advice Unit is broadening the advice it offers to cover firms in the mortgage, general insurance and debt sectors. Additionally, they have just launched an open debate on the risks and benefits of distributed ledger technology.
Internationally, the FCA have recently signed co-operation agreements with their counterparts in China, Japan, Canada and Hong Kong with a view to transferring and sharing innovative ideas globally.
However, as innovation expands and develops, there could be a risk that if different jurisdictions set up their own regulatory testing programmes, with different standards and procedures, a ‘Wild West’ scenario could emerge. This goes against the FCA’s drive for diminishing risk for consumers.
The FCA is also concerned that there could be reputational and trust risks in financial innovation if there are examples of global failures in the future. But, despite these concerns, they believe that by co-operating internationally and sharing the principles of good innovation, the reputation and success of the industry is safe.
CONCLUSION
The FCA is committed to supporting innovation by simplifying and removing regulatory barriers, as long as it offers better outcomes for consumers and it is proud of the role it is taking in this field. It views its approach as bold and is not afraid of breaking new ground, eg. its regulatory sandbox was the first of its kind.
The FCA is calling on firms to continue to push the boundaries of innovation and urges them to come forward with their ideas.
To access the full speech by Christopher Woolard, please click here.
For more information, and any guidance or advice on the FCA’s innovation projects, Cleveland & Co, your External in-house counsel, are here to help.
