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FCA to investigate digital innovation barriers


The FCA is investigating how regulation could be holding back innovation in digital and mobile solutions after warnings from financial services firms.

The FCA today published its response to a consultation it launched in October to find regulatory barriers to innovation in digital and mobile solutions for financial services.

The regulator wanted to find examples of specific UK or EU rules or policies that might create these barriers, as well as what rules should be brought in to ease the problem.

The regulator says that most responses to its call for input were positive.

But it says: “In their responses, most stakeholders sought clarity over regulatory definitions. It was also clear from the responses to the call for input that, while many innovative digital and mobile solutions already exist with stakeholders eager to use them and provide them to consumers, there are a number of perceived barriers that are preventing greater use of all the available technology.”

The FCA says the responses fell into six camps:

  • How rules on consumer communications apply to digital and mobile solutions
  • Customer due diligence for anti-money laundering  checks
  • Payments systems and services
  • Data storage, privacy and data protection
  • Financial advice
  • Regulation and its relationship with technology

On financial advice, the FCA says: “Many stakeholders, particularly those involved in the advice and investment market, suggested that lack of clarity over regulatory definitions of advice, guidance and personal recommendations were a barrier to the use of digital and mobile solutions.”

“Some stakeholders went further and suggested that the treatment of liability (specifically how
the Financial Ombudsman Service makes decisions on consumer redress) coupled with the
absence of a liability longstop for advisors, is another barrier to innovation. Respondents on
this point were concerned that these factors act as a disincentive in the development of digital
and mobile solutions.”

The regulator says that it acknowledges the issue.

It says: “These perceived barriers are relevant to both digital and mobile solutions as well as wider development in the sector itself.

“Following the Government’s pension reforms it is more important than ever to
ensure that the provision of advice functions in a way that benefits consumers.
As many stakeholders said in their responses, a number of issues relating to this.”

The regulator says it will fully respond to this in the Financial Advice Market Review.

The FCA will send its proposals to the Government later in the spring.

Northview Group distribution director David Finlay says: “The FCA’s feedback statement on regulatory barriers to technological innovation is to be welcomed. The UK is the global leader in financial technology, and the FCA has a crucial role to play when it comes to supporting the continued development of FinTech across financial services.

“In the world of mortgages, technology will play an ever more important role in the years to come. Whether shaping the design of products, propositions and communications, or improving the working lives of brokers into the future, there are huge opportunities for those in the industry that embrace the digital age and harness the benefits of FinTech to launch genuine innovations. We look forward to the FCA increasingly supporting the sector as Project Innovate continues.”

The 45 survey respondents included The British Bankers’ Association, CapitalOne, HSBC, Lloyds Banking Group, Nationwide and Virgin Money.


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  • Peter Turner 14th March 2016 at 2:20 pm

    I note that the longstop has been denied again.

    And they wonder why people do not want to get into the advice market.