The rise of FinTech and the regulatory reaction Gillian - PowerPoint PPT Presentation

The rise of FinTech …and the regulatory reaction Gillian Roche-Saunders Victoria Aderounmu January 2016

What is Fintech? Oxford Dictionary

What is Fintech? Financial technology , also known as FinTech, is a line of business based on using software to provide financial services. Financial technology companies are generally startups founded with the purpose of disrupting incumbent financial systems and corporations that rely less on software. Wikipedia

What is Fintech? Investopedia

The climate for Fintech in the UK Gaps in the market Competition mandate for FCA Government’s aim for a global FinTech centre London landscape: finance, technology and political power

A flavour of the FinTech landscape Financial Management Payments & Transfers Currency Lending & Financing Virtual Currency Banking Infrastructure Investments & Exchanges Data

Regulatory challenges for FinTech generally Breaking new ground Online risk   Competence of team Cybercrime, cybersecurity   Identifying your activities Getting a bank account Old rules to new business Global business, local rules   Assessing what rules apply No harmonisation  New ways of interacting

Financial management  Guided investing  ‘Robo’ advice  Online wealth management

Financial management Promotion GUIDING TOOLS Empowerment Overreliance CAPACITY FOR LOSS Cost-effective Second-guessing CENTRALISED PROPOSITION Shoehorning

Virtual Currency “A type of unregulated, digital money, which is issued and usually controlled by its developers, and used and accepted among the members of a specific virtual community” Transfer to Added to Transaction Verification Purchase e-wallet Blockchain

Benefits User Transparency Cheaper and Cyber-crime Financial anonymity: of faster defence inclusion transactions transactions Privacy Risks User Lack of Low Terrorist anonymity: government Volatility consumer financing intervention protection Crime

Distributed Ledgers Digital Record • One public version of identical records of transactions and existence of VCs Reliable • Difficult to manipulate information Financial Services • Potential to renovate the current banking infrastructure Further opportunities • Endless possibilities of use, such as taxes, passports, votes etc.

The Future of Virtual Currencies

Payments and Transfers  Registered vs Authorised  PSD2 and Wire Money Transfer Regulations  Security of payments (EBA guidelines)  New: the Payment Systems Regulator

Challenger banks FT  Credit risk: standardised vs internal ratings based approach  Services vs risk on balance sheet  Bank Start-Up Unit

Challenger banks Bank authorisation when Initial need early certainty in Application outcome • Business viability • Senior appointments • Capital and liquidity Authorisation with Limitation Restriction lifted • IT and outsourcing Mobilisation • Governance • Policies & procedures

Crowdfunding & P2P lending Crowdfunding  Challenge of existing rules to new business  Focus on ‘user journey’ P2P: A brand new regime  Prescriptive rules not a good fit  Latitude causing uncertainty

FCA Sandbox • Reducing uncertainty, cost and time • Encouraging more solutions to be trialled Individual guidance Restricted authorisation FCA No enforcement action letter Waiver Regulated Sandbox activity Legislation Exemptions By Way of Business test Virtual sandbox Industry Sandbox umbrella

FCA Sandbox Innovative Consumer benefit Need for testing Sufficient preparation done In scope

Questions