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The government announced in its Productivity Plan 2015 that departments is going to be required to make use of regulators to publish innovation plans by spring 2016. This announcement reflects one of the keys government aim to make sure the UK is supporting the development of new business models and disruptive technologies, breaking down barriers to entry and productivity that is boosting. To achieve this the UK’s regulation and enforcement frameworks must be agile enough to respond flexibly to continuing developments in new technologies and business that is disruptive.
The goal of this consultation is to lay out ongoing and proposed work to foster a supportive regulatory framework for financial services that allows innovation to flourish.
The innovation plan covers the work for the financial services regulators: Financial Conduct Authority (FCA ), Payment Systems Regulator (PSR ), Prudential Regulation Authority (PRA ) and 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 disruptive business models to encourage growth
- How services that are financial are better utilising new technologies to build efficiency savings and reduce burdens on business
This consultation invites touch upon the task of financial services regulators to guide innovative technology and disruptive business models. We would also choose to understand where there could be gaps in regulatory approach in terms of innovation that is supporting.
Draft innovation policy for financial services
2.1 Innovation and regulation
The government’s vision is for UK financial services to function as most acceptable and innovative on the planet, delivering greater choice and value for consumers.
The government has already taken significant action to reach this vision. This consists of:
Creating just the right regulatory environment is particularly important to make certain that innovative firms can compete and grow. For this end, HM Treasury has firmly embedded competition and innovation objectives in the regulatory landscape for financial services through the main regulators’ objectives and remits.
2.2 How technology that is new shaping financial services
A vital focus of innovation in financial services in modern times may be the growth of fintech – technology solutions which deliver financial services, often in a far more efficient and way that is customer-focused. For example, technology has enabled:
- consumers to produce payments via their smartphones
- the matching of consumers and businesses with money to save lots of and invest with those who have to borrow
- personal insurance pricing on the basis of 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 dealing with incumbents to deliver more innovative services and products 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 areas of financial services – for instance, payments, peer-to-peer lending, big data analytics and robo-advice – and the prospect of technology to transform financial services is substantial. 25% of most fintechs globally have been in the payments that are retail 1 )
Great britain is the world-leader in fintech. An independent report from Ernst and Young (EY) published in February ranked great britain since 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 there are probably be some regions of existing regulation, developed well before digital and technological advances, which could now be acting as a barrier to innovation.
2.4 Financial Conduct Authority (FCA )
It helps innovative firms gain access to fast and feedback that is frank the regulatory implications of their concepts, plans and choices. In addition seeks to tackle the structural conditions that impede the progress of innovators entering the market.
Section of Project Innovate could be the Innovation Hub that will help new and established businesses (both regulated and non-regulated) introduce innovative financial products and services into the market. The Innovation Hub also identifies places where the regulatory framework needs to adapt to enable further innovation in the interests of consumers.
Up to now, Project Innovate has helped over 250 firms, 18 of which have been 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 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 regarding the dilemma of disproportionate de-risking, which denies businesses access to banking facilities, and how the FCA might influence firms to take an even more proportionate approach
- using informal steers on proposed innovations to allow more direct communication with firms
Great britain attracts fintech innovators from around the world – many choose to base themselves in the UK, not just to be part of a vibrant local ecosystem, but additionally simply 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 best regulators when they check out start business that is doing other regulatory jurisdictions
- Stand ready to help innovators that are non-UK in entering the UK market
- Seeks co-operation agreements with key regulators. As an example, 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 approaches to standard-setters that are international
Other initiatives to aid competition and innovation
The guidance aims to dispel misconceptions about regulators’ opposition towards the encourage and cloud innovation in this region.
It is designed to encourage greater utilization of technology and behavioural insights to provide communications that help people make effective decisions about products and services. The FCA is devoted to working together with industry where an idea has strong potential to boost consumer outcomes; the FCA may consider waiving or disclosure that is modifying where appropriate to facilitate this testing.
It is also taking a look at amending its Handbook to remove a number of disclosure requirements which have not been as effectual 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 when you look at the provision of payment services. Limited access is certainly considered a barrier to entry for brand new banks, e-money issuers as well as other payments institutions, using the concern that the pace of innovation in this buy essay online certain area is just too slow.
A main objective is be effective proactively with small payments institutions and fintech firms to spot in which the barriers to innovation exist, which feeds in to the PSR ’s policy development and implementation.
This includes publishing reports that are annual assess each scheme’s compliance, which include places where the PSR expects to see improvements. The PSR will consider further regulatory action if improvements are not made.
To ensure the marketplace is operating in a way 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 this season. Based on 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 pair of priority areas. This includes:
- Greater assurance and control for end users
- Simplifying use of marketplace for payment services providers
- An assessment of how industry could work to detect and reduce financial crime
- An evaluation associated with the costs and benefits of account number portability