On 26 April 2023, the FCA published a speech by its Chief Operating Officer and Executive Director of Authorisations, Emily Shepperd, delivered at City Week 2023. In her speech, Ms Shepperd discusses how regulation can help the UK lead in fintech.

Topics covered in the speech include:

• What regulators can do to make it easier for fintech to thrive. Ms Shepperd notes that one of the essential ingredients is regulatory compliance, such as complying with know-your-client rules, getting the appropriate licenses and making sure the technology firms are using meets all applicable regulatory rules. She reassures firms that the sooner they get a handle on regulatory issues, the sooner and faster they can grow.

• The FCA’s Regulatory Sandbox, where firms are allowed to test new ideas in a controlled environment before they are potentially unleashed to the markets. As well as giving firms access to regulatory expertise and the tools to test these ideas and pivot or adapt where needed, the Sandbox also ensures that firms are up to speed with the basics of regulation and can bring their product or service to market more quickly.

• The FCA’s Innovation Pathways, which help firms launch innovative products and services by helping them understand how regulation relates to their activities. This is open to both authorised and unauthorised firms who will need authorisation in the future, as well as technology providers that are looking to deliver innovation to UK consumers or firms. So far, more than 830 firms have been supported through the Regulatory Sandbox and Innovation Pathways.

• The new Early and High Growth Oversight function, an FCA scheme which helps firms embed regulation from an early stage so they can stay strong and resilient in ever-shifting markets. Ms Shepperd flags that this is particularly important for innovators and fintechs who are testing new ideas that can bring value to consumers if done the right way. Early and High Growth Oversight works with firms immediately after authorisation, to help them move from concept to reality. Ms Shepperd further highlights that innovation does not stop once authorised, with 10% of Early and High Growth Oversight firms changing their business model in the first year of being FCA regulated.

• Crypto and emerging technology. Following the launch of the FCA’s crypto sprints, the FCA is now at the stage where many want to come within the parameters of existing rules and institutions in order to grow. Whilst the message often heard from the FCA on crypto is that if you invest in crypto, you should be prepared to potentially lose all your money, the FCA has also been helping crypto companies make their fund flows more transparent. Most crypto companies recently registered under anti-money laundering rules gained registration only after working with the FCA.

• The FCA’s Emerging Technology Hub, which collaborates with industry, academia, policymakers and regulators to analyse the risks and opportunities that new tech poses to consumers and markets. The FCA has also established a dedicated Data, Technology and Innovation function of 500 specialist colleagues. Other innovative projects it is working on include the HM Treasury-led Financial Market Infrastructure Sandbox and the Global Financial Innovation Network’s Greenwashing Techsprint.

Ms Shepperd concludes her speech by remarking that the UK remains the most attractive destination for financial technology investment in Europe, and is globally second only to the United States. As such, the FCA urges firms to get involved, whether that is with the FCA’s forthcoming sprints, Innovation Pathways, Early and High Growth Oversight programme or sandboxes, in order to help fintechs and other financial services firms navigate their way through regulation so they can “flourish and grow”.