The Bank of England (BoE) has published a speech by Mark Carney, BoE Governor, on building the infrastructure to realise the promise of FinTech. Mr Carney was speaking at the International Fintech Conference 2017. Points of interest in his speech include:

• the BoE is taking steps to encourage FinTech’s development. The BoE’s new bank start-up unit has already authorised four new “mobile” banks, and, under the FinTech Accelerator, the BoE is working with a number of firms on proofs of concept (PoC), ranging from strengthening cyber security to using artificial intelligence for regulatory data, and improving understanding of distributed ledger technology (DLT);
• the FinTech Accelerator is now open for the fourth round of applications. The BoE has updated a related webpage to indicate that it is looking to work on new PoCs in four priority areas;
• in relation to the financial system’s soft infrastructure, the BoE is assessing how FinTech could change risks and opportunities along the financial services value chain. It is then using its existing frameworks to respond where necessary. The BoE applies consistent approaches to activities that give rise to the same risks, regardless of whether those are undertaken by “old regulated” or “new FinTech” firms;
• currently, the most significant changes are taking place at the front-end, where innovative payment service providers are providing new user interfaces for domestic retail and cross-border payment services through digital wallets or pre-funded e-money. Other aspects of the customer relationship are also being opened up. For example, aggregators are providing customers with ready access to price comparison and switching services. This will expand further when aggregators gain access to banks’ application programme interfaces;
• FinTech providers have generally avoided undertaking traditional banking activities. The BoE’s view, for now, is that without a substantive change in business models or scale of activities, the Financial Policy Committee is unlikely to want to bring these firms into the regulatory perimeter. However, the changes to customer relationships resulting from FinTech competition could reduce customer loyalty and the stability of funding of incumbent banks. If this happens, the BoE would need to ensure that prudential standards and resolution regimes for affected banks are sufficiently robust;
• in relation to the financial system’s hard infrastructure, the BoE is working to ensure it allows innovation to thrive while maintaining safety. Currently, only 52 institutions have settlement accounts in the UK’s Real-Time Gross Settlement (RTGS) system, which the BoE operates. The BoE is working with the FCA and HM Treasury to widen access to RTGS to include non-bank PSPs. It will issue its new blueprint for RTGS in early May 2017; and
• the BoE is also working with industry to help co-ordinate advances in hard and soft infratructure. In particular, new technologies (such as DLT) that could transform wholesale payments, clearing and settlement are being considered. To help distinguish DLT’s potential from its hype, the BoE has completed its own PoC. It is a member of Hyperledger, together with private market participants and tech firms, and it intends to make its next generation RTGS compatible with settlement in a distributed ledger.

View BoE speech on building infrastructure to realise promise of FinTech, 12 April 2017