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The us government announced with its Productivity Plan 2015 that departments may be necessary to make use of regulators to publish innovation plans by spring 2016. This announcement reflects the main element government aim to ensure the UK is supporting the growth buy essay of home based business models and disruptive technologies, wearing 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 goal of this consultation is always to lay out ongoing and work that is proposed foster a supportive regulatory framework for financial services that enables innovation to flourish.
The innovation plan covers the task regarding the financial services regulators: Financial Conduct Authority (FCA ), Payment Systems Regulator (PSR ), Prudential Regulation Authority (PRA ) while 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 disruptive business models 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 comment on the task of financial services regulators to aid technology that is innovative disruptive business models. We would also choose to understand where there could be gaps in regulatory approach with regards to innovation that is supporting.
Draft innovation arrange for financial services
2.1 Innovation and regulation
The government’s vision is for UK financial services to function as the most competitive and innovative on the planet, delivering greater choice and value for consumers.
The government has already taken action that is significant reach this vision. This includes:
Creating the best regulatory environment is particularly vital that you make sure innovative firms can compete and grow. To the end, HM Treasury has firmly embedded competition and innovation objectives when you look at 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 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 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 on the basis of 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 produce more innovative products and services 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 aspects of financial services – as an example, payments, peer-to-peer lending, big data analytics and robo-advice – and also the potential for technology to change financial services is substantial. 25% of all fintechs globally are in the payments that are retail 1 .
Great britain could be the world-leader in fintech. An independent report from Ernst and Young (EY) published in February ranked great britain 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 rap >2 that is growing .
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 introduction of new technologies and business that is disruptive in financial services.
The government’s priority is always to make certain that regulation is proportionate and promotes innovation, instead of constrains or inhibits it. Indeed you will find likely to be some aspects of existing regulation, developed long 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 feedback that is frank the regulatory implications of these concepts, plans and choices. Moreover it seeks to tackle the issues that are structural impede the progress of innovators going into the market.
Element of Project Innovate is 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 conform to enable further innovation in 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.
- dealing with government on its plans to introduce anti-money laundering regulation for digital currency exchanges, to present a environment that is supportive legitimate digital currency users and businesses, and create a hostile environment for illicit users
- making a statement taking a look at the extent of the dilemma of disproportionate de-risking, which denies businesses use of banking facilities, and exactly how the FCA might influence firms to take an even more approach that is proportionate
- using informal steers on proposed innovations to enable more direct communication with firms
The united kingdom attracts fintech innovators from around the planet – many decide to base themselves within the UK, not just to be part of a captivating local ecosystem, but also because they begin to see the UK as a springboard to launch their businesses or products internationally and bolster their competitiveness.
As part of this work the FCA :
- Helps put UK-based innovators in touch with the right regulators when they turn to start conducting business in other regulatory jurisdictions
- Stand prepared to help innovators that are non-UK in entering the UK market
- Seeks co-operation agreements with key regulators. For instance, the FCA recently signed a world-first Co-operation Agreement with the Australian regulator, ASIC, to facilitate the referral of innovative firms between their respective innovation hubs
- Promotes pro-innovation regulatory answers to international standard-setters
Other initiatives to support innovation and competition
The guidance aims to dispel misconceptions about regulators’ opposition to the encourage and cloud innovation in this area.
It is designed to encourage greater utilization of technology and behavioural insights to supply communications that help people make effective decisions about products and services. The FCA is invested in working together 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 get rid of a wide range of disclosure requirements which have not been as effective as initially envisaged in terms of providing appropriate information to consumers.
2.5 Payment Systems Regulator (PSR )
Usage of payment systems is an important driver of competition and innovation in the provision of payment services. Limited access is certainly considered a barrier to entry for new banks, e-money issuers along with other payments institutions, with the concern that the pace of innovation in this area is too slow.
A objective that is main to work proactively with small payments institutions and fintech firms to determine where the barriers to innovation exist, which feeds into the PSR ’s policy development and implementation.
This consists of publishing reports that are annual assess each scheme’s compliance, which include areas where the PSR expects to see improvements. The PSR will consider further action that is regulatory 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 prior to the final reports later this current year. Dependent on its findings, the PSR may implement remedies or undertake further policy work to support competitive innovation.
Following engagement with the wider payments community, the Forum developed its set that is initial of areas. This consists of:
- Greater assurance and control for end users
- Simplifying use of market for payment services providers
- An assessment of how industry can perhaps work to detect and reduce crime that is financial
- An assessment associated with the costs and great things about account number portability