FinTech Trends & Regulation Update Tony Katz & Mark O'Conor 24 November 2015
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FinTech
Trends & Regulation
Update
Tony Katz & Mark O'Conor
24 November 2015
What we will cover
UK Context
UK Government's plan
The need to regulate at all?
Implications of technology
Current initiatives
Existing regulatory regime in the UK
Project Innovate
24 November 2015 2
UK context
24 November 2015
source: http://raconteur.net/technology/bright-future-for-uk-fintech
8 February 2015
3
UK context
24 November 2015
source:
https://www.gov.uk/govern
ment/uploads/system/uplo
ads/attachment_data/file/4
13095/gs-15-3-fintech-
futures.pdf
FinTech Futures
The UK as a World Leader
in Financial Technologies
A report by the UK
Government Chief
Scientific Adviser
4
UK government's plan
24 November 2015
source: http://www.payexpo.com/page.cfm/action=press/libID=1/libEntryID=30/listID=3
5
The need to regulate at all?
24 November 2015
• Disruptive business models
• Promote financial inclusion
• New methods for fraud
• Data privacy
• Inappropriate risk taking
• Decentralised digital
currencies
6
Implications of technology
24 November 2015 7
Current initiatives
FinTech 'sandbox'
'RegTech'
APIs in banking
Digital currencies
Payments Systems Regulator
Others including:-
Research Councils
The Alan Turing Institute
Digital Catapult 24 November 2015 8
Existing UK Regulatory Regime
24 November 2015
Bank of England
Financial Policy Committee (FPC) • Considers macro issues affecting economic and financial stability;
• responds to any threats which it identifies;
• does not have direct regulatory responsibility for any particular
type of firm.
Financial Conduct Authority (FCA) The objective of the FCA is to make sure that financial
markets work well so that consumers get a fair deal. It
does this by ensuring that:
1. the financial industry is run with integrity;
2. firms provide consumers with appropriate
products and services; and
3. consumers can trust that firms have their best
interests at heart.
Prudential Regulation Authority
(PRA) 1. Promote the safety and soundness of the firms it
regulates;
2. Contribute to the securing of an appropriate
degree of protection for those who are or may
become insurance policyholders (specific to
insurance firms); and
3. Facilitate effective competition.
9
Existing UK Regulatory Regime
The PSR has three objectives:
1. to ensure that payment systems are operated and developed in a
way that considers and promotes the interests of all the businesses
and consumers that use them;
2. to promote effective competition in the markets for payment
systems and services - between operators, Payment Service
Providers and infrastructure providers; and
3. to promote the development of and innovation in payment systems,
in particular the infrastructure used to operate those systems
24 November 2015 10
What is Project Innovate?
Launched in October 2014.
Aimed at both start-ups and established businesses.
Mission: to remove unnecessary barriers which prevent
companies from bringing innovative ideas to the financial
services markets and ensure that:
1. Innovation is encouraged in the interests of consumers; and
2. competition is promoted through 'disruptive innovation'
24 November 2015 11
How does Project Innovate work?
1. The Innovation Hub
Used by businesses applying for authorisation or for a variation of
permission;
Provides innovative businesses with access to fast, frank feedback
on the regulatory impacts of their concepts, plans and ideas.
24 November 2015
Eligibility Criteria
Ground-
Breaking
Benefit to Consumers
Research regulatory position
Need the support
12
24 November 2015
How does Project Innovate work?
Regulatory Sandbox
Themed Weeks
Reg Tech
The Cloud
Call for Input
2. Pro-Competition Initiatives
13
Call for Input
Purpose?
Rules and policies that are restricting
innovation
Rules and policies which should be
introduced to facilitate innovation
24 November 2015 14
Call for Input – July 2014
Main Issues
Uncertain regulatory
system
Regulation for digital
currencies
Access to bank
accounts
Complex FCA website
Complex, costly and
lengthy authorisation
process
24 November 2015 15
Call for Input – July 2014 – FCA
Responses
24 November 2015
Main Issues
Uncertain regulatory
system
Regulation for digital
currencies
Access to bank
accounts
Complex FCA website
Complex, costly and
lengthy authorisation
process
Set up the
Innovation Hub
Supported HM
Treasury's call for
benefits that digital
currencies could
bring Published
"de-risking"
statement
Launched
microsite
that is
clearer for
firms to use
16
Call for Input – June 2015
'By creating a connected digital single
market, we can generate up to EUR 250
billion of additional growth in Europe
in the course of the mandate of the
next Commission, thereby creating
hundreds of thousands of new jobs,
notably for younger job-seekers, and a
vibrant knowledge-based society' –
Jean-Claude Juncker, President of the European
Commission
24 November 2015
Innovation in Digital and Mobile Solutions
Digital Solutions:
17
24 November 2015
Call for Input – June 2015
Ideas being discussed
aggregator services
cloud-based
services
biometric banking
cognitive computing
distributed ledgers
and digital currencies
Developments already on the
market
biometric readers for
banking authentication
automated advice
services GPS to
transmit driving data
18
24 November 2015
Call for Input – June 2015
Mobile Solutions
0%
10%
20%
30%
2010 2014
Mobile
Banking
Monthly
Usage
19
FCA work in the digital and mobile space:
Call for Input Invite businesses to raise strategic barriers
or enablers, in the UK and EU, that are preventing the
development of digital and mobile solutions.
Outcome due: Spring 2016
24 November 2015
Call for Input – June 2015
2014 report on mobile
banking and payments
2015 guidance on
retail investment
advice
Engaged with external
stakeholders to discuss barriers to outsourcing cloud-based solutions.
20
Call for Input – November 2015
'Supporting the Development and Adoption of RegTech'
24 November 2015 21
Technology Accelerators
Real-Time and System Embedded Compliance/Risk Evaluation Tools
Big Data Techniques
Visualisation and
RoboTools
Software Integration
Tools
Cloud Technologies.
FCA update:
Spring 2016
How successful is Project Innovate?
24 November 2015
on-going assistance to 91
firms
informal steers to 34 firms
137 requests for support
83% firms rated their experience of the innovation Hub as excellent
or good
92% rated the effectiveness of
the FCA communications as excellent or
good.
The
Innovation
Hub
22
Next Steps for Project Innovate
24 November 2015
End-to-end experience
International engagement
Engagement with bigger companies
23
Speakers
24 November 2015 24
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