The Financial Conduct Authority (FCA) has today published its Business Plan for 2018/19, with a promise to release an in-depth review of the fintech industry later on this year. It’s set to include analysis of retail banking, crowdfunding and cryptocurrencies, in addition to turning the UK’s sandbox into a global effort.
In perhaps a rather significant move for many in the fintech space, the FCA has announced it will be conducting a full-scale review into the differences between emerging and traditional retail banking business models.
In a bid that will put the likes of Monzo and Starling Bank up against incumbent competitors Lloyds and Barclays, the FCA wants to further understand how these differences in technological innovation might be the driving force behind evidence of rising competition, like the declining use of branches over digital channels. An update is expected to be released in the first half of 2018, explaining the results of some preliminary analysis conducted on information already collected from retail banks.
Cryptocurrencies are also high up on the watchdog’s list of interests, as it intends to work with the Bank of England and the Treasury as part of a taskforce to “develop thinking”, with plans to release a Discussion Paper later this year outlining its future policy ideas. Though crypto is not currently part of the FCA’s regulatory perimeter, it has said that “some models of use or packaging cryptocurrencies bring them within our perimeter, making the landscape complex”.
Just last week, the FCA released a statementon the use of cryptocurrency derivatives by UK firms, warning those that aren’t authorised by the regulator to be wary of fines if caught using derivatives like contracts for differences and crypto options or futures.
Additionally, the FCA has said that the post-implementation period for its review of the crowdfunding sector is now underway, after publishing its interim feedback in 2016. Since then, the regulator has been working to address further areas of concern, highlighting loan-based crowdfunding as a particular pain point due to a continually-evolving market.
The final set of new rules are scheduled for publication later this year, as the FCA seeks to support “a sector that can innovate, compete and challenge established firms and business models without putting consumers at unacceptable risk.”
Despite the plan’s focus elsewhere on impact-reducing measures as a result of Brexit, it is promising to see fintech given centre stage so that regulatory risk can be minimised. Andrew Bailey, chief executive of the FCA, said: “The Business Plan is an important way in which we are transparent about our priorities for the year. We recognise that this year we need to dedicate a significant amount of resource to withdrawal from the EU.
“As a result, setting our priorities this year has involved a particularly rigorous level of scrutiny and challenge to focus on areas where we see the greatest potential for harm.”
The regulator hopes to transform its UK sandbox into a more global function as the year progresses, as firms are currently only permitted to conduct regulatory tests in the UK despite the international nature of fintech. Consultations are happening to decide what a global sandbox might look like, with the promise of “a lot of interest in cross-border testing” that could reduce costs and accelerate expansion for start-ups.