The UK financial regulator, the Financial Conduct Authority (FCA), aims to play an active role in RegTech by concentrating its efforts on increasing its engagement and collaboration with the RegTech community, using its convening authority to help bring together market participants to work on shared challenges and to act as a catalyst for change that helps to unlock the potential benefits of technology innovation.
This is the outcome of the FCA’s RegTech Call for Input based on the feedback the regulator has received. The FCA today published a report that summarises the responses to the consultation and outlines the regulator’s approach to RegTech for 2016/2017.
The FCA issued the RegTech Call for Input (CFI) in November 2015 to seek broader views on how the regulator should progress and prioritise its RegTech work. The high level of interest in RegTech and importance to the market was demonstrated by the outstanding level of interest and quality of the responses.
The report summarises the responses into four main themes and provides a high-level view of the technology/concept in each theme and its potential benefits:
– Efficiency and collaboration with a view to technology that allows more efficient methods of sharing information;
– Integration, standards and understanding, i.e. technology that drives efficiencies by closing the gap between intention and interpretation like semantic tech and data point models, shared data ontology, and APIs that allow systems to interact consistently;
– Predict, learn and simplify through technology that simplifies data, allows better decision making and the creation of adaptive automation like Big Data analytics, visualization technology or machine learning and cognitive technology;
– New directions with regard to technology that allows regulation and compliance processes to be looked at differently like Blockchain and distributed ledger technology, biometrics or system monitoring and visualisation.
According to the report, respondents thought that the FCA by clarifying its expectations and helping to drive industry standards and guidance, it would be possible for firms to better integrate their internal data and processes. Improved collaboration and engagement could encourage the development of RegTech to address existing as well as forward looking challenges and improve the overall relationship and interface between the regulator and the regulated firms. For example, improved collaboration and engagement to share priorities and future direction could help guide and influence RegTech product roadmaps. Respondents also contemplated that FCA certification of RegTech that meet relevant criteria could build credibility. This could increase the acceptance of, and therefore investment in, new regulatory tools. In turn, this could make guidance and standards easier to understand, reducing costs while improving compliance.
With regard to blockers to innovation, participants stated that uncertainty over regulations, the stance of the regulator and credibility of unproven technology was making firms cautious. They thought that support from the regulator to assist in ‘proving ‘ technology through tools such as a ‘virtual sandbox’ and encouraging innovation by providing assurances and support for RegTech, may help to overcome some of these barriers.
Legislation has placed restrictions on accessing, processing and storage of data. Respondents felt that this combined with a lack of accompanying standards, especially regarding data storage and processing, is impeding the development and adoption of new technologies.
Based on this feedback, the FCA concluded that there is a desire for the regulator to play an active role in RegTech. Respondents thought that improved collaboration and engagement across the ecosystem would not only encourage the development of RegTech to address challenges, but would also and improve the interface between the regulator and the firms it regulates.
The FCA stated that it is its ambition to be a regulator that is fully engaged with the FinTech community and keen to improve the interface between the regulator and the regulated. To do this the regulator intends to actively encourage and support the development and use of innovative technology, acting as a catalyst for further innovation within the FinTech sector, while remaining cognisant of the restrictions of our role as the regulator.
The FCA’s work to promote innovation is strongly tied to our objective of promoting effective competition in the interests of consumers. Creating a competitive marketplace is a priority for us and our approach to RegTech is a core part of delivering our Innovation and Technology priority theme for 2016/2017.
The FCA statement together with the full report is available here.