FCA announces Project Innovate – to help support financial services industry innovation

Martin Wheatley, Chief Executive, of the UK’s financial services regulator – the Financial Conduct Authority (FCA) – delivered a speech today (Thurs, 29 May 2014) at Bloomberg, London, on the subject of “Making innovation work for firms and consumers”.

He announced what he called “one of the most important pieces of work currently emerging at the FCA, a project to help support industry innovation: from smaller start-ups to mass market with new models.”

Key extracts from the speech:

“In financial technology specifically, global investment more than tripled over the five years to 2013 – up to $2.97bn. The UK and Ireland were the fastest growing incubators in the world here, developing at an annualized rate of some 74% since 2008 – set against 23% in Silicon Valley.

“And London, in particular, has become a European trend-setter. Its booming tech scene, accelerators and primacy in financial services combining to create a marriage made in innovation-heaven, with the emergence of FinTech50 companies such as Monitise, TransferWise, Nutmeg and many others.

“What has become increasingly obvious, as the dust settles on this latest wave of progress, is that it’s an imperative for regulators to be standing on the right side of progress. And this is one of the reasons why the FCA has launched Project Innovate.

The project will look at three broad questions:

  • How do we encourage innovation in the financial service market?
  •  Does the regulator do enough to promote competition and create room for new entrants into the market, particularly those with novel business models?
  • And, third, does FCA regulation more broadly serve the needs of innovative businesses?

“In scope are a number of important areas, including: digitalisation; big data analytics; venture capital; virtual currencies, crowd funding; and peer-to-peer – many of which are (or indeed have already) transformed finance in improbable timescales.

“A key objective of the programme is to make sure positive developments are supported by the regulatory environment.

“So, priority areas here might include the likes of mobile banking, online investment or money transfer, where we’re seeing innovations such as apps that allow you to take a picture of a bill and make payments with a tap of the smartphone. The possibilities opening up for consumers are extraordinary – and it’s clearly important they can be developed in the UK.

“To help this happen, the FCA is opening its doors to financial service firms (large and small) who are developing innovative approaches that aren’t explicitly addressed by current regulation – or where the guidance may be ambivalent.

“Following on from this, the FCA will be pulling together a scoping document exploring how innovation can be supported more effectively. That paper will focus on FCA expectations of firms, as well as specifics around advice and support for businesses bringing new models of financial service to market.

“In the meantime, the FCA will be opening up a hub in its policy team which will pull together FCA expertise to support innovators in two distinct ways.

“First, by providing help to firms who are developing new models or products advice on compliance so they can navigate the regulatory system. Second, by looking for areas where the system itself needs to adapt to new technology or broader change – rather than the other way round.

“On top of this, the FCA will also be launching an incubator to support innovative, small financial businesses ready themselves for regulatory authorisation.”

The full text of the speech can be read here: http://www.fca.org.uk/news/making-innovation-work