The FCA has published a speech by Mary Starks (Director of Competition, FCA) entitled Disruptive innovation in financial markets.
Mrs Starks begins her speech by providing an overview of the Fintech sector and the role of the regulator. In particular she mentions that “Fintech” covers the current wave of technological innovation covering a diverse set of new ideas, such as peer to peer lending, whereby borrowers and lenders are directly connected by a platform rather than intermediated by a bank. In relation to the regulator’s role Mrs Starks notes that the FCA has a competition mandate which requires it to stand in the shoes of new entrants and challengers. One of the ways that it has sought to explore this mandate is by launching Project Innovate and within that establishing an Innovation Hub, a unit within the FCA geared entirely towards working with innovative businesses.
Mrs Starks states that the Innovation Hub provides direct support to innovative firms. She adds that Fintech firms often struggle with how to start a conversation with the regulator – the Hub provides such an avenue, with an approach tailored for these firms. New business models may not fit easily into regulations designed around the last generation – the FCA can advise individual firms on navigating the regulatory framework, and take soundings about which aspects of it that may need to be reviewed.
Another stand of work is about the regulator listening to the industry. In this regard Mrs Starks reminds her audience that the FCA issued a call for input last June asking firms to tell it about the specific regulatory barriers they face when innovating using digital and mobile solutions.
The Innovation Hub is also exploring the feasibility of a regulatory “sandbox” – a place where businesses, new entrants and established players can experiment with innovative products, services, business models and delivery channels without immediately incurring all the usual regulatory consequences. The FCA will be reporting on the results of the feasibility study to the Government this autumn.
In the final part of her speech Mrs Stark discusses the Payment Systems Regulator (PSR) and what disruption looks like. On the PSR she notes that it has an innovation objective which it can achieve in two primary ways. First, by removing barriers to competitive innovation – ensuring challengers can access payments infrastructure so that their businesses can move money. Second, by ensuring collaboration delivers good results for all users of the payments systems. When discussing what disruption looks like Mrs Stark states that there is a very diverse population but the common theme is that they are technology driven.
View Disruptive innovation in financial markets, 27 October 2015