Regulator-bashing is a popular sport in our industry but the FCA does not get the credit it deserves for its proactive approach to innovation.
Its approach is a stark contrast to that from New York State Department of Financial Services superintendent Mario Vullo, who told a recent conference in Washington DC: “A sandbox is where toddlers play. Adults play by the rules”.
The lack of engagement from New York is symptomatic of a wider failure by the US to participate in the way financial services regulation is evolving around the world. The demise of the Department of Labor rules on fiduciary standards as a result of the Trump presidency is a major loss of protection for consumers there.
The engagement from Asia, Australasia, the Middle East and Canada, on the other hand, is very positive. Ultimately, what consumers want from financial services is the same the world over. People want to protect their families and provide for their future.
There is a real opportunity for fintech to be the catalyst for global financial regulation.
It has become noticeable in recent months that Mifid and GDPR are having a wider influence across the world. The requirements and consequences of both these sets of EU rules are influencing behaviour far beyond the natural borders of their jurisdiction. This shows how regulation can spread.
The complexities of Mifid compliance are such that this is an obvious area for the use of technology to provide clear, concise information.
If financial regulation can be globally consistent, there are huge opportunities for economies of scale. Technology built for the use of 30,000 or so advisers in the UK might be reused by hundreds of thousands, if not millions, of advisers around the world.
But there is another obstacle in the way: for all of this to achieve its full potential, reform of the Financial Ombudsman Service is essential.
Millions of UK consumers are locked out of financial services because of cost. Fintech is one of the major ways in which this can be addressed.
While it is great to have a forward looking regulator in the FCA, the FOS must also engage and provide clarity on how it might address complaints in the future.
Currently, organisations planning low cost services have to factor in the inconsistent and unpredictable nature of FOS decisions. In many situations, services are not being launched because of this. Ironically, the FOS is hurting those it is designed to protect.
The world has moved on massively in the almost 20 years since the Financial Services and Markets Act. A new Ombudsman structure fit to meet the needs of the digital age is required. If we fail to address this, it will seriously constrain the UK’s ability to capitalise on our role as a fintech leader.
Equally, while the FCA sandbox is a really important initiative, I am surprised we have not seen more documentation sharing what has been learnt by the various cohorts. This could increase the benefits to the whole market.
GFIN has the potential to provide the foundations for truly global financial regulation. While it would of course be far better if the US and EU were directly to engage, there is a leadership opportunity in their absence. Hopefully, what will be created will have the capacity for both these important markets to come on board.
Ian McKenna is director of the Finance & Technology Research Centre