Innovate Finance Calls for Fintech Innovation to Be at Heart of Regulators’ Competitiveness Objective

Innovate Finance, the industry body representing FinTechs in the UK, has recently submitted a response to HM Treasury’s call for proposals on how UK financial regulators’ new competitiveness objectives can be best benchmarked and measured for success. 

The new Financial Services and Markets Act introduces a new requirement on the FCA and PRA to promote the competitiveness of UK financial services, and gives the Treasury the power to set performance metrics to measure success. Innovate Finance has emphasised that supporting innovation in FinTechs is key to ensure competitiveness and has put forward a comprehensive set of metrics and actions to assess this.

In the light of the FCA’s new Consumer Duty that requires firms to provide good outcomes for consumers, Innovate Finance has also called for a review of all existing consumer regulations to assess any duplication or contradiction with the new Consumer Duty and repeal old ‘tick box’ regulations.

As part of its proposals, Innovate Finance has called for:

• A new ‘RegTech test’ to be undertaken when the FCA or PRA introduce any new regulations to assess how technology can best enable regulatory compliance, unleashing the UK’s growing RegTech sector and helping firms of all sizes.

•  A move away from a ‘one size fits all’ approach to regulation where the smallest firms have to meet the same requirements as the largest firms. Proportionate regimes should be introduced to support growth and should include the introduction of a start-up and scale-up test as part of a cost-benefit analysis of new regulations, to assess the impact on small and growing innovators.

• Better resources and expertise in the regulator to understand and support innovation. These shall include: dedicated account managers for FinTechs after they graduate from sandbox and growth programmes, providing them with the same ‘named contact’ supervisors that large incumbent institutions enjoy; more interchange between industry and the regulators (eg. secondments, joint training programmes and external hires); and faster authorisations to reduce delays in appointing key personnel and regulatory market approvals for FinTechs. 

Janine Hirt, CEO at Innovate Finance, comments: “Over the last decade the UK has been the leading hub for FinTech globally, supported by regulators who have embraced innovation. However, as other countries are catching up, we risk falling behind unless our regulators continue to innovate. The UK is one of the best places in the world to start and scale a FinTech, driving talent, capital and international business into the UK economy. This is also determined by a dynamic and proportionate regulatory environment that can position the UK as the global epicentre for FinTech.

“As technology, and the FinTechs who enable it, become central to financial services we need to see new regulatory approaches that support innovation. We also welcome new policies that can create more agile regulators that can protect both consumers and market competitiveness and enable innovation in financial services”.  

The Innovate Finance Consultation Response is available here.

HM Treasury “Financial Services Regulation: Measuring Success” is available here.