FinTech

Trends & Regulation

Update

Tony Katz & Mark O'Conor

24 November 2015

What we will cover

UK Context

UK Government's plan

The need to regulate at all?

Implications of technology

Current initiatives

Existing regulatory regime in the UK

Project Innovate

24 November 2015 2

UK context

24 November 2015

source: http://raconteur.net/technology/bright-future-for-uk-fintech

8 February 2015

3

UK context

24 November 2015

source:

https://www.gov.uk/govern

ment/uploads/system/uplo

ads/attachment_data/file/4

13095/gs-15-3-fintech-

futures.pdf

FinTech Futures

The UK as a World Leader

in Financial Technologies

A report by the UK

Government Chief

Scientific Adviser

4

UK government's plan

24 November 2015

source: http://www.payexpo.com/page.cfm/action=press/libID=1/libEntryID=30/listID=3

5

The need to regulate at all?

24 November 2015

• Disruptive business models

• Promote financial inclusion

• New methods for fraud

• Data privacy

• Inappropriate risk taking

• Decentralised digital

currencies

6

Implications of technology

24 November 2015 7

Current initiatives

FinTech 'sandbox'

'RegTech'

APIs in banking

Digital currencies

Payments Systems Regulator

Others including:-

Research Councils

The Alan Turing Institute

Digital Catapult 24 November 2015 8

Existing UK Regulatory Regime

24 November 2015

Bank of England

Financial Policy Committee (FPC) • Considers macro issues affecting economic and financial stability;

• responds to any threats which it identifies;

• does not have direct regulatory responsibility for any particular

type of firm.

Financial Conduct Authority (FCA) The objective of the FCA is to make sure that financial

markets work well so that consumers get a fair deal. It

does this by ensuring that:

1. the financial industry is run with integrity;

2. firms provide consumers with appropriate

products and services; and

3. consumers can trust that firms have their best

interests at heart.

Prudential Regulation Authority

(PRA) 1. Promote the safety and soundness of the firms it

regulates;

2. Contribute to the securing of an appropriate

degree of protection for those who are or may

become insurance policyholders (specific to

insurance firms); and

3. Facilitate effective competition.

9

Existing UK Regulatory Regime

The PSR has three objectives:

1. to ensure that payment systems are operated and developed in a

way that considers and promotes the interests of all the businesses

and consumers that use them;

2. to promote effective competition in the markets for payment

systems and services - between operators, Payment Service

Providers and infrastructure providers; and

3. to promote the development of and innovation in payment systems,

in particular the infrastructure used to operate those systems

24 November 2015 10

What is Project Innovate?

Launched in October 2014.

Aimed at both start-ups and established businesses.

Mission: to remove unnecessary barriers which prevent

companies from bringing innovative ideas to the financial

services markets and ensure that:

1. Innovation is encouraged in the interests of consumers; and

2. competition is promoted through 'disruptive innovation'

24 November 2015 11

How does Project Innovate work?

1. The Innovation Hub

Used by businesses applying for authorisation or for a variation of

permission;

Provides innovative businesses with access to fast, frank feedback

on the regulatory impacts of their concepts, plans and ideas.

24 November 2015

Eligibility Criteria

Ground-

Breaking

Benefit to Consumers

Research regulatory position

Need the support

12

24 November 2015

How does Project Innovate work?

Regulatory Sandbox

Themed Weeks

Reg Tech

The Cloud

Call for Input

2. Pro-Competition Initiatives

13

Call for Input

Purpose?

Rules and policies that are restricting

innovation

Rules and policies which should be

introduced to facilitate innovation

24 November 2015 14

Call for Input – July 2014

Main Issues

Uncertain regulatory

system

Regulation for digital

currencies

Access to bank

accounts

Complex FCA website

Complex, costly and

lengthy authorisation

process

24 November 2015 15

Call for Input – July 2014 – FCA

Responses

24 November 2015

Main Issues

Uncertain regulatory

system

Regulation for digital

currencies

Access to bank

accounts

Complex FCA website

Complex, costly and

lengthy authorisation

process

Set up the

Innovation Hub

Supported HM

Treasury's call for

benefits that digital

currencies could

bring Published

"de-risking"

statement

Launched

microsite

that is

clearer for

firms to use

16

Call for Input – June 2015

'By creating a connected digital single

market, we can generate up to EUR 250

billion of additional growth in Europe

in the course of the mandate of the

next Commission, thereby creating

hundreds of thousands of new jobs,

notably for younger job-seekers, and a

vibrant knowledge-based society' –

Jean-Claude Juncker, President of the European

Commission

24 November 2015

Innovation in Digital and Mobile Solutions

Digital Solutions:

17

24 November 2015

Call for Input – June 2015

Ideas being discussed

aggregator services

cloud-based

services

biometric banking

cognitive computing

distributed ledgers

and digital currencies

Developments already on the

market

biometric readers for

banking authentication

automated advice

services GPS to

transmit driving data

18

24 November 2015

Call for Input – June 2015

Mobile Solutions

0%

10%

20%

30%

2010 2014

Mobile

Banking

Monthly

Usage

19

FCA work in the digital and mobile space:

Call for Input Invite businesses to raise strategic barriers

or enablers, in the UK and EU, that are preventing the

development of digital and mobile solutions.

Outcome due: Spring 2016

24 November 2015

Call for Input – June 2015

2014 report on mobile

banking and payments

2015 guidance on

retail investment

advice

Engaged with external

stakeholders to discuss barriers to outsourcing cloud-based solutions.

20

Call for Input – November 2015

'Supporting the Development and Adoption of RegTech'

24 November 2015 21

Technology Accelerators

Real-Time and System Embedded Compliance/Risk Evaluation Tools

Big Data Techniques

Visualisation and

RoboTools

Software Integration

Tools

Cloud Technologies.

FCA update:

Spring 2016

How successful is Project Innovate?

24 November 2015

on-going assistance to 91

firms

informal steers to 34 firms

137 requests for support

83% firms rated their experience of the innovation Hub as excellent

or good

92% rated the effectiveness of

the FCA communications as excellent or

good.

The

Innovation

Hub

22

Next Steps for Project Innovate

24 November 2015

End-to-end experience

International engagement

Engagement with bigger companies

23

Speakers

24 November 2015 24