The UK Financial Conduct Authority (FCA) has initiated a new consultation that is going beyond the UK borders when it comes to Fintech innovation. Announced today, the FCA has created the Global Financial Innovation Network (GFIN). The multinational group includes regulatory agencies from the US, Singapore, Hong Kong, Australian, Canada and more.
FCA Director of Competition, Christopher Woolard, said the creation of GFIN is an important step for the FCA to be able to better understand and harness the benefits of innovation in financial services for consumers, while managing the potential harm.
“The establishment of the GFIN can help share the experiences and knowledge from across different markets, while also providing a platform for innovative firms wishing to scale their propositions via testing in multiple countries.”
The members as announced include:
- Abu Dhabi Global Market (ADGM),
- Autorité des marchés financiers (AMF)
- Australian Securities & Investments Commission (ASIC)
- Central Bank of Bahrain (CBB)
- Bureau of Consumer Financial Protection (BCFP, USA)
- Dubai Financial Services Authority (DFSA)
- Financial Conduct Authority (FCA, UK)
- Guernsey Financial Services Commission (GFSC)
- Hong Kong Monetary Authority (HKMA)
- Monetary Authority of Singapore (MAS)
- Ontario Securities Commission (OSC, Canada)
- Consultative Group to Assist the Poor (CGAP)
As described by the FCA, GFIN will seek to provide “a more efficient way for innovative firms to interact with regulators, helping them navigate between countries as they look to scale new ideas. It will also create a new framework for co-operation between financial services regulators on innovation related topics, sharing different experiences and approaches.”
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The list of members incorporates most of the leading global regulators when it comes to embracing Fintech innovation with the glaring exception of the US Securities and Exchange Commission which is apparently not participating.
The consultation on GFIN has three main functions:
- act as a network of regulators to collaborate and share experience of innovation in respective markets, including emerging technologies and business models;
- provide a forum for joint policy work and discussions; and
- provide firms with an environment in which to trial cross-border solutions.
As part of the exercise, GFIN will seek to draw up a shared mission statement to help guide the principles of the multi-lateral entity.
As financial services are becoming increasingly borderless and digitized, firms are having to manage a plethora of rules and regulations that inevitably add to the cost of services. Providing a vehicle that creates a forum to better align regulatory issues can be beneficial to both government agencies and consumers but this objective is clearly not without challenges.
The consultation document explains:
“The major emerging innovation trends within financial services are increasingly global, rather than domestic, in nature. For instance, big data, artificial intelligence (AI), and blockchain based solutions are being developed and deployed simultaneously in different financial markets. Since there is a general trend towards developing these digital solutions, now is a time to consider how to begin building new ways to share experience and manage the questions that emerge. Financial services regulators must re-consider existing ways of working and collaborating, in order to balance potential benefits of innovation (for consumers and the financial sector as a whole) with traditional policy objectives, namely financial stability, integrity, financial inclusion, competition and consumer wellbeing and protection.”
This most recent consultation follows a policy move in early 2018 where the FCA broached the concept of a “global sandbox” to better manage Fintech innovation. For that consultation, 50 responses were collected which expressed a “positive sentiment” towards more collaboration. Key themes within the feedback included:
- Regulatory co-operation: providing an environment for regulators to collaborate on common challenges or policy questions firms face in different jurisdictions.
- Regulatory engagement: a space where industry can engage with a broader group of regulatory stakeholders on a single topic or policy question.
- Speed to international markets: could reduce the time it takes to bring ideas to international markets.
- Governance: Must be transparent and fair to those potential companies wishing to apply for cross-border testing.
- Emerging technologies/business models: A wide range of topics and subject matters were highlighted in the feedback, particularly those with notable cross-border application. Among areas highlighted were AI, distributed ledger technology, data protection, regulation of securities and Initial Coin Offerings (ICOs), know your customer (KYC) or anti- money laundering (AML), and green finance.
A meeting of global regulators took place in March of 2018 with some of the participants expressing their interest in moving forward with the GFIN concept.
The UK has been a leader in Fintech innovation and is frequently named as the gold standard in empowering financial entrepreneurs to test, and provide, new financial services. This leadership has been aided in part due to a principles based approach of compliance and a clear mission of enabling competition within financial services. In pursuit of these goals, the UK has already established numerous bilateral relationships with global regulators to create a bridge of engagement to fulfill mutually beneficial Fintech objectives.
The FCA is requesting feedback from the GFIN members by October 14, 2018. Feedback will be both formal and informal.
This coming fall, the FCA expects to be in a position to formally launch GFIN.