Consultation paper on draft innovation arrange for financial services

Consultation paper on draft innovation arrange for financial services

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The government announced with its Productivity Plan 2015 that departments will be necessary to work with regulators to write innovation plans by spring 2016. This announcement reflects the main element government make an effort to ensure the UK is giving support to the development of new business models and disruptive technologies, breaking down barriers to entry and productivity that is boosting. To get this done the UK’s regulation and enforcement frameworks must be agile enough to respond flexibly to continuing developments in new technologies and business that is disruptive.

The objective of this consultation would be to set out ongoing and work that is proposed foster a supportive regulatory framework for financial services which allows innovation to flourish.

The innovation plan covers the job associated with the services that are financial: Financial Conduct Authority (FCA ), Payment Systems Regulator (PSR ), Prudential Regulation Authority (PRA ) in addition to 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 generate efficiency savings and minimize burdens on business

This consultation invites touch upon the work of financial services regulators to guide technology that is innovative disruptive business models. We would also want to understand where there could be gaps in regulatory approach in terms of supporting innovation.

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 acceptable and innovative on earth, delivering greater choice and value for consumers.

The us government has recently taken significant action to reach this vision. This includes:

Creating just the right environment that is regulatory particularly important to ensure that innovative firms can compete and grow. To the end, HM Treasury has firmly embedded competition and innovation objectives when you look at the regulatory landscape for financial services through the main regulators’ objectives and remits.

2.2 How technology that is new shaping financial services

A key focus of innovation in financial services in recent years is the development of fintech – technology solutions which deliver financial services, often in an even more efficient and way that is customer-focused. As an example, technology has enabled:

  • consumers in order to make payments via their smartphones
  • the matching of consumers and businesses with money to save and invest with those who have 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 financial services sector is characterised by both new disruptive players and fintechs working with incumbents to provide more innovative services and products through existing networks and infrastructure.

The sector that is fintech diverse: from small dynamic start-ups to more established players. Fintechs operate in lots of aspects of financial services – as an example, payments, peer-to-peer lending, big data analytics and robo-advice – while the possibility of technology to transform financial services is substantial. 25% of most fintechs globally have been in the retail payments industry 1 )

Great britain could be the world-leader in fintech. An report that is independent Ernst and Young (EY) published in February ranked the united kingdom whilst 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 business that is disruptive to encourage growth

This section outlines how each financial services regulator intends to support and promote innovation, facilitating the introduction of new technologies and disruptive business models in financial services.

The government’s priority is always to make certain that regulation is proportionate and promotes innovation, in the place of constrains or inhibits it. Indeed you can find probably be some areas of existing regulation, developed well before digital and advances that are technological which may now be acting as a barrier to innovation.

2.4 Financial Conduct Authority (FCA )

Project Innovate

It can help innovative firms gain access to fast and frank feedback on the regulatory implications of these concepts, plans and choices. In addition it seeks to tackle the issues that are structural impede the progress of innovators going into the market.

Element of Project Innovate may be the Innovation Hub which helps new and businesses that are establishedboth regulated and non-regulated) introduce innovative financial products and services to your market. The Innovation Hub also identifies places where the regulatory framework needs to conform to enable further innovation into the interests of consumers.

Up to now, Project Innovate has helped over 250 firms, 18 of that have been authorised to undertake regulated activities. It offers an end-to-end experience for new entrants. Firms that receive initial support from the Innovation Hub have their applications for authorisation handled via a specialised Project authorisation process that is innovate.

  • dealing with government on its plans to introduce anti-money laundering regulation for digital currency exchanges, to give you a environment that is supportive legitimate digital currency users and businesses, and create a hostile environment for illicit users
  • making a statement looking at the extent of the issue of disproportionate de-risking, which denies businesses use of banking facilities, and just how the FCA might influence firms to take an even more proportionate approach
  • using informal steers on proposed innovations to enable more direct communication with firms

The united kingdom attracts fintech innovators from around the whole world – many decide to base themselves within the UK, not only to engage in a vibrant 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 proper regulators if they check out start conducting business in other regulatory jurisdictions
  • Stand prepared to help innovators that are non-UK in going into the UK market
  • Seeks co-operation agreements with key regulators. As an example, the FCA recently signed a world-first Co-operation Agreement with all the Australian regulator, ASIC, to facilitate the referral of innovative firms between their respective innovation hubs
  • Promotes pro-innovation regulatory answers to standard-setters that are international

Other initiatives to aid competition and innovation

The guidance aims to dispel misconceptions about regulators’ opposition to the cloud and encourage innovation in this area.

It is designed to encourage greater utilization of technology and behavioural insights to deliver communications which help people make effective decisions about services and products. The FCA is dedicated to dealing with industry where an idea has strong potential to enhance consumer outcomes; the FCA may consider waiving or modifying disclosure rules where appropriate to facilitate this testing.

Additionally it is taking a look at amending its Handbook to remove an amount of disclosure requirements that have not been as effectual as initially envisaged in terms of providing information that is appropriate 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 has long been considered a barrier to entry for brand new banks, e-money issuers along with other payments institutions, with all the concern that the pace of innovation in this area is too slow.

A main objective is be effective proactively with small payments institutions and fintech firms to spot where in actuality the barriers to innovation exist, which feeds in to the PSR ’s policy development and implementation.

Competitive innovation

This includes publishing reports that are annual assess each scheme’s compliance, which includes places where the PSR expects to see improvements. The PSR will consider further action that is regulatory improvements are not made.

The PSR is conducting two market reviews to ensure that the market is operating in a way that supports competitive innovation

The interim findings for both reviews were published in February and March before the final reports later this present year. Depending on its findings, the PSR may implement remedies or undertake further policy work to support competitive innovation.

Collaborative innovation

Following engagement utilizing the wider payments community, the Forum developed its initial set of priority areas. This includes:

  • Greater assurance and control for end users
  • Simplifying access to market for payment services providers
  • An assessment of how industry can perhaps work to detect and minimize crime that is financial
  • An assessment associated with costs and advantages of account number portability

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