As the UK continues to focus on transforming its journey in financial technology, regulators have a significant opportunity to reshape the finance landscape by embracing innovation. Innovate Finance, the core representative for UK fintech has emphasised its vision in response to the HM Treasury’s recent call for new measures on refining and articulating the success of the UK financial regulator’s new competitiveness plans.
The discussions come soon after the Financial Services and Markets Act, which requires the FCA and PRA to heighten the competitive edge of UK financial services. A critical part of this plan is the Treasury’s authority to articulate vital performance indicators for success. Defining what competitiveness looks like in a rapidly evolving market is important. According to Innovate Finance, it’s primarily focused on embracing fintech innovation. The recommendations suggest which specific measures are necessary to transform this vision into reality.
Custom regulations and strengthening partnerships
A core suggestion from Innovate Finance is including a ‘regtech test’. This assessment, to be introduced whenever new regulations evolve from the FCA or PRA, intends to evaluate how technology can enhance and streamline regulatory compliance. Not only would this strengthen the developing UK regtech sector, but it would also provide credible benefits for companies across various markets, from smaller startups to more established organisations.
Innovate Finance supports a system that modifies regulations based on company size and scale. This definitive strategy recognises the challenges facing smaller companies against larger businesses and suggests mechanisms like custom tests assessing the impacts of new regulations on emerging and growing companies. But these structural changes require enhanced capacities within the regulatory groups. Innovate Finance envisions equipping regulators with the resources and skills to embrace and nurture innovation. This includes delivering specific points of contact for fintech to harness greater collaboration between industry stakeholders and regulators, and enhancing the approval processes, reducing potential challenges for new fintech businesses.
The risk of falling behind Janine Hirt, the CEO of Innovate Finance, explained the reasoning behind innovation in fintech. Over the last few years, the UK has been a global leader in fintech, supported by regulators who have embraced innovation. However, as other nations accelerate their plans, the UK risks falling behind unless regulators focus on innovation. The UK remains one of the best locations in the world to start and scale a fintech, supporting new talent and driving capital and international business into the UK economy. However, this transformation depends on delivering a dynamic and appropriate regulatory environment that can position the UK at the core of fintech worldwide.
As technology and associated fintech involved in tech become more vital to financial services, we must see new regulatory conditions appear that can support innovation. New policies that enable more agile regulators to protect customers and market competition are welcomed and allow for further innovation in the finance industry.
