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The us government announced with its Productivity Plan 2015 that departments will be necessary to make use of regulators to create innovation plans by spring 2016. This announcement reflects the key government try to ensure the UK is giving support to the growth of home based business models and disruptive technologies, breaking down barriers to entry and productivity that is boosting. To get this done 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 framework for financial services which allows innovation to flourish.
The innovation plan covers the work of the 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 technology that is new 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 create efficiency savings and reduce burdens on business
This consultation invites comment on the task of financial services regulators to support innovative technology and disruptive business models. We would also choose to understand where there can be gaps in regulatory approach with regards to innovation that is supporting.
Draft innovation policy 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 in the field, delivering greater choice and value for consumers.
The us government has recently taken significant action to reach this vision. This includes:
Creating just the right environment that is regulatory particularly crucial that you ensure 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 main regulators’ objectives and remits.
2.2 How new technology is shaping financial services
A key focus of innovation in financial services in the past few years is the growth of fintech – technology solutions which deliver financial services, often in a more efficient and way that is customer-focused. For example, technology has enabled:
- consumers to help make payments via their smartphones
- the matching of consumers and businesses with money to save lots of and invest with those who need certainly to borrow
- personal insurance pricing based on the characteristics and behaviours of individual consumers
- the development of new currencies that are digital
The services that are financial is characterised by both new disruptive players and fintechs dealing with incumbents to provide more innovative products and services 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 – as well as the prospect of technology to transform financial services is substantial. 25% of most fintechs globally are in the payments that are retail 1 )
The united kingdom could be the world-leader in fintech. An report that is independent Ernst and Young (EY) published in February ranked the UK 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 business that is disruptive 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 sure that regulation is proportionate and promotes innovation, in the place of constrains or inhibits it. Indeed there are probably be some regions 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 will help innovative firms get access to fast and frank feedback on the regulatory implications of these concepts, plans and choices. In addition seeks to tackle the issues that are structural impede the progress of innovators going into the market.
Section of Project Innovate could be the Innovation Hub that will help 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 when you look at the interests of consumers.
To date, Project Innovate has helped over 250 firms, 18 of that 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 Innovate authorisation process.
- working together with government on its buy personal essay intends to introduce anti-money laundering regulation for digital currency exchanges, to supply a supportive environment for legitimate digital currency users and businesses, and produce a hostile environment for illicit users
- making a statement taking a look at the extent associated with issue of disproportionate de-risking, which denies businesses use of banking facilities, and exactly how the FCA might influence firms to take a more proportionate approach
- using informal steers on proposed innovations make it possible for more direct communication with firms
Great britain attracts fintech innovators from about the whole world – many decide to base themselves into the UK, not just to engage in an exciting local ecosystem, but in addition because they begin 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 right regulators once they turn 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 example, 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 standard-setters that are international
Other initiatives to aid competition and innovation
The guidance is designed to dispel misconceptions about regulators’ opposition towards the encourage and cloud innovation in this region.
It is designed to encourage greater use of technology and behavioural insights to provide communications which help people make effective decisions about services and products. The FCA is devoted to working with industry where an idea has strong potential to improve consumer outcomes; the FCA may consider waiving or modifying disclosure rules where appropriate to facilitate this testing.
It’s also taking a look at amending its Handbook to remove a number of disclosure requirements which have not been as potent as initially envisaged in terms of providing appropriate information to consumers.
2.5 Payment Systems Regulator (PSR )
Use of payment systems is an important driver of competition and innovation within 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 too slow.
A main objective is to function proactively with small payments institutions and fintech firms to spot where in fact the barriers to innovation exist, which feeds 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 make sure that the marketplace is operating in a fashion that supports competitive innovation, the PSR is conducting two market reviews:
The interim findings for both reviews were published in February and March before the final reports later in 2010. According to its findings, the PSR may implement remedies or undertake further policy work to support innovation that is competitive.
Following engagement because of the wider payments community, the Forum developed its initial collection of priority areas. This can include:
- Greater control and assurance for end users
- Simplifying use of market for payment services providers
- An evaluation of how industry could work to detect and minimize crime that is financial
- An evaluation of this costs and benefits of account number portability