FCA outlines FinTech and RegTech priorities for year ahead
The UK Financial Conduct Authority (FCA) recently issued its Business Plan 2017/18 that deals with its FinTech and RegTech priorities for the year ahead. The FCA wants to engage more with regional and Scottish FinTech hubs. In its risk outlook, the FCA talks about more complex value chains that utilise FinTech posing a risk to consumer protection and market integrity. The issues associated with the oversight and controls of increasingly complex chains of third party relationships are reflected in the FCA’s priorities. The technological resilience of incumbent firms will also continue to be an area of focus because of the risk of disruption to financial markets. The FCA states that FinTech firms may not fully understand the scope of regulation and its impact on their business model. This could lead to cases of non-compliance with FCA rules, which could pose risks to consumer protection and market integrity. In addition, the FCA fears that greater reliance on technology poses increased operational risk, and risks to market integrity. The FCA believes that FinTech business models shift risk from financial firms to consumers without consumers fully understanding the implications or having adequate safeguards.
Cross-sector priorities for the FCA also include RegTech. The FCA believes that RegTech leads to more efficient and effective regulation and compliance. It wants to encourage RegTech innovation and adoption to increase firms’ compliance with regulation while reducing the costs. Innovative RegTech technology can help firms interpret the FCA regime of rules and submit the required regulatory information, in more economic, efficient and effective ways. The FCA will continue its programme of work begun in 2016 to reduce firms’ compliance costs by encouraging the financial industry to drive forward the development and adoption of technologies that can unlock the efficiency and effectiveness of regulatory reporting.