As the UK charts a transformative journey in the world of financial technology, regulators have a prime opportunity to shape this landscape by fostering innovation. Leading this clarion call is Innovate Finance, the representative body for the nation’s fintech sector.
In a proactive step, Innovate Finance has articulated its vision in response to HM Treasury’s recent call for strategies on refining and gauging the success of UK financial regulators’ new competitiveness objectives.
This dialogue comes on the heels of the Financial Services and Markets Act, which mandates the FCA and PRA to amplify the global competitive edge of UK’s financial services. Integral to this is the Treasury’s authority to frame key performance indicators for success.
But what does true competitiveness look like in this rapidly evolving sector? According to Innovate Finance, it pivots on championing fintech innovation. Its detailed recommendations shed light on the tactical measures needed to translate this vision into reality.
Tailored regulations and strengthened collaborations
A central proposition from Innovate Finance is the inception of a ‘regtech test’. This assessment, to be initiated whenever new regulations emerge from the FCA or PRA, seeks to evaluate how technology can be harnessed to streamline regulatory compliance. Not only would this galvanise the burgeoning UK regtech sector but also provide tangible benefits for firms across the spectrum, from startups to established entities.
Innovate Finance advocates for a system that tailors regulations based on a firm’s size and scale. This nuanced strategy recognises the disparate challenges faced by smaller firms versus their larger counterparts, and proposes mechanisms like a unique test assessing the ramifications of new regulations on nascent and growing businesses.
But these structural changes necessitate enhanced capacities within the regulatory bodies. Innovate Finance envisions equipping regulators with both the resources and expertise to nurture innovation. This includes creating dedicated points of contact for fintechs fostering greater collaboration between industry stakeholders and regulators, and accelerating the approval processes, thus minimising potential roadblocks for fintech pioneers.
Risk falling behind
Janine Hirt, CEO of Innovate Finance, encapsulated the sentiment: “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”.