The FCA has published a speech given by Christopher Woolard (Director of Strategy and Competition, FCA) entitled The FCA and innovation.
At the beginning of his speech Mr Woolard mentions that since its creation in 2013, the FCA was designed to be abit different. It has a stronger focus on the consumer and a statutory objective to promote competition in the interests of consumers. Mr Woolard explains that to some degree, promoting competition means worrying about the risks that some things might not happen: that new products might not be launched, that new players won’t join the market, or that there won’t be new choices for consumers, or better value. He adds that disruption – particularly disruptive new entry – is a key part of promoting competition but that financial services regulation can be complex, and deeply traditional in its approach. This is why the FCA established an Innovation Hub with a team that provides direct support for innovators.
Mr Woolard explains that the Innovation Hub does two main things: it helps innovators navigate regulation and it also looks at changing FCA policies and processes where this would encourage useful innovation. Mr Woolard states that if firms are interested in reaching out to the FCA for support there is a point of contact on its website where firms need to answer a few simple questions. Since October 2014, the FCA has received approximately 170 requests for support and has provided assistance to just under half of these firms. The FCA has also held two seminars on how to become authorised for start-ups. The FCA will soon announce more dates in this series of events.
Mr Woolard then provides examples of businesses that the FCA has supported. One such business is Aire who told the FCA that they wanted to empower consumers to build a picture of their creditworthiness. Consumers themselves can provide information about their academic background, salary, or even their LinkedIn profile. Aire believes that these metrics will help them paint a richer picture of consumers’ ability to repay.
In the final part of his speech Mr Woolard discusses what is next for the FCA and the Innovation Hub. He mentions that one thing that firms have told the FCA is that they want easier ways of testing out products or services with customers. They want a “regulatory sandbox approach” whereby testing occurs before committing to the time and expense of becoming fully authorised. Mr Woolard notes that this approach works in some parts of the technology and pharmaceutical industries but the financial services regulatory regime makes this approach difficult as firms can only sell their products to consumers once they have become authorised. However, Mr Woolard mentions that the FCA wants to explore options and develop a new approach that could support the testing of innovations at an early stage.
Mr Woolard also mentions that when the FCA set up the Innovation Hub, it also developed the ‘informal steer’ which allows the Hub to give innovators substantive comments quickly, although they rely on them at their own risk. He also notes that the way consumers engage with financial services is changing rapidly with digital and mobile channels making a huge impact. Therefore in the autumn the FCA will be issuing a Call for Input which will be asking a broad audience about examples of regulatory barriers to innovation in digital and mobile. This will help the FCA understand where it needs to make changes, or simply where it needs to communicate its approach better, because it thinks that there are some barriers to innovation grounded more in perception than reality.
View The FCA and innovation, 22 May 2015