In mid July the FCA announced a new policy initiative, Project Innovate, geared towards facilitating the regulatory journey for both new and established firms with innovative business models in the financial services sector. It recognized the transformative effect that technology was having on financial services, potentially delivering, not least a more competitive sector, but also a wider range of benefits for the economy as whole. techUK was asked to seek views from its members and provide feedback on the proposed policy changes. One of the proposals on which the FCA sought input was on the potential usefulness of an Innovation Hub for businesses with innovative ideas who were keen to operate in the financial services sector but in need of support and guidance in navigating the regulatory landscape.
The FCA today announced that the Innovation Hub is up and running and businesses can submit requests for support. The FCA will filter through requests and seek further understanding but, broadly, will make offers of support to firms that are offering products or services of direct and tangible benefit to consumers and businesses – click here for more detailed criteria used in assessing eligibility. As outlined in its summary paper published today, the Innovation Hub will offer qualifying firms access to the following services:
- a dedicated contact person for innovation-related queries, including provision of individual guidance and informal steers, as appropriate
- continuation of additional support for up to a year after authorisation (for those firms who have been supported through the authorisations process)
- help to understand the regulatory framework and how it applies
- an ongoing programme of external engagement with innovators and other relevant entities
In support of these services, the Hub will also:
- engage with firms on consumer research and trials of innovative tools
- identify areas where the regulatory regime needs to adapt to facilitate innovation
- champion innovation within the FCA and use the expertise gained to inform our policy in an innovation-friendly way
The FCA also addressed specific issues and concerns raised by firms and other stakeholders during the call for input:
Digital currencies: Uncertainty as to whether or not digital currencies such as Bitcoin will be regulated in the UK was repeatedly said to prevent businesses from experimenting with related technologies that could benefit consumers.
The FCA noted that In August 2014, the Chancellor of the Exchequer announced that the Treasury will carry out a major programme of work to explore the risks and benefits of digital currencies. The FCA noted that they are engaging with the Treasury on this review to understand whether and how regulation could promote innovation in digital currencies. They are also keen to determine how regulation might support the use of block chain technology more broadly across financial services.
Access to business bank accounts: During the course of the FCA evidence gathering, smaller businesses repeatedly noted that they were experiencing difficultiy in gaining access to bank accounts because some financial institutions are no longer providing accounts to certain categories of businesses.
The FCA noted that they are also concerned about these difficulties and are considering what more could be done in this field. techUK is delighted that the FCA also views this as a crucial issue and that they will continue to provide regular updates on progress in this area. The FCA noted that while deciding whether or not to accept a customer is a commercial decision for banks that it felt it should only be necessary to reject innovative businesses on relatively few occasions. It also noted that it would encourage financial institutions to take a risk-based approach to anti-money laundering requirements.
techUK looks forward to receiving updates on the FCA's progress in this area.
Project Innovate was in its design intended to foster a more dynamic and adaptive regulatory regime. As Martin Wheatley said in a speech earlier today, "Project Innovate is here to stay. Our commitment to fostering innovation in the interests of consumers is not a fad. It is now an important part of our regulatory philosophy".
In support of that approach, the FCA are organising a series of events to continue engagement with firms and organisations that drive innovation in financial services. The first event will be geared towards start-ups and will be held on 5 December 2014. The FCA will will provide an overview of the process for getting authorised and answer participants' questions. If you are interested in attending, please register for a place before November 10.