FinTech Regulation Gains Traction Across The Pond

In the U.K., the continued movement toward bringing fledgling FinTech startups to flight is gaining traction.

The Wall Street Journal reported Monday that the Financial Conduct Authority has given forth several details of its regulatory “sandbox” that is on track to debut at the beginning of next week, with an eye on letting relatively nascent firms (and even more well-established brethren) bring new financial products or even new business models to market without the attendant paperwork and regulatory hurdles that might otherwise stymie innovation.

Regulating such a fast growing market means some trial and error, however, will be par for the course.  In an interview with the Journal, Christopher Woolard, the FCA’ strategy director, said that innovation may have a tradeoff with the key to make sure that consumers are in fact not being “ripped off” – as the publication termed it.

“In many ways, it won’t be just the firms that are learning in the sandbox; we will be too,” the executive was quoted as saying.

The initial plan is to have two cohorts moving through the process annually – and authorization will be granted on a product by product or service by service basis.  Each company is to follow guidance set by the FCA, which in turn can be tailored to that company, or its individual rollout. – and exit strategies must be defined to safeguard consumers.

The sandbox lets companies tread carefully in rolling out new ideas – with one example coming in the form of a robo adviser for financial advice, which would have the twin backstops of being rolled out to a limited “test” audience, with another check and balance coming as a financial adviser – a flesh and blood one – would be able to review the process before orders get put through.  The agency itself is flexible in that it allows for the enforcement of ideas rather than just mandating adherence to a set of rules – and the regulator has been working with a few hundred companies over the past two years.

As might be expected, firms across the pond are watching this regulator/incubator relationship. The U.S. is relatively overladen with Fintech regulation and both the state and federal levels, with streamlining earnestly desired within the industry.

Of course, the U.S. is not without a semi-doppelgänger in this arena, with the debut last year of the FTC’s Office of Technology Research and Innovation, as part of its Bureau of Consumer Protections.

The focus here is decidedly consumer centric, with emphasis on privacy, smart homes and the Internet of Things.  It is widely expected, however, that the U.K. initiative may bring fresh perspective to the corporate side of the coin when it comes to fostering innovation without the red tape.


New PYMNTS Report: The CFO’s Guide To Digitizing B2B Payments – August 2020 

The CFO’s Guide To Digitizing B2B Payments, a PYMNTS and Comdata collaboration, examines how companies are updating their AP approaches to protect their cash flows, support their vendors and enable their financial departments to operate remotely.

Click to comment