FinTech Industry & Regulation – Page 25 – FinTech and Blockchain Law Watch

FCA discussion paper on distributed ledger technology

Apr 13 2017

The FCA has published a discussion paper (DP) on the potential uses of distributed ledger technology (DLT) in financial services. The purpose of the DP is to start a dialogue on the risks and opportunities in relation to DLT. The FCA has gained exposure to DLT through its Regulatory Sandbox initiative.

The FCA describes DLT as “a set of technological solutions that enables a single, sequenced, standardised and cryptographically-secured record of activity to be safely distributed to, and acted upon by, a network of varied participants.” It states that industry efforts to investigate DLT have become especially concentrated over the past 24 months and, in the second half of 2017 into 2018, it expects to see firms moving on from “Proof of Concept” to “real-world” deployment of this kind of technology.

Global FinTech Report 2017

Apr 12 2017

By Jonathan Lawrence

In its recently published Global FinTech Report 2017, PwC provides the results of a survey based on the responses of over 1,300 participants involved in the financial services industry from 71 countries and across six regions. Respondents included CEOs, directors, heads of department and other top management.

Key messages include:

88% of incumbents are increasingly concerned they are losing revenue to innovators
77% of financial institutions will increase internal efforts to innovate and 82% expect to increase FinTech partnerships in the next three to five years
77% expect to adopt blockchain in some way by 2020
54% of incumbents see data storage, privacy and protection as the main regulatory barrier to innovation
30% of large institutions are investing in artificial intelligence

UK Regulatory Innovation Plan

Apr 10 2017

By Jonathan Lawrence

The UK Treasury has recently published its Regulatory Innovation Plan in relation to FinTech. The plan overviews the current work and future projects of the four UK financial services regulators: Financial Conduct Authority (FCA), Payment Systems Regulator (PSR), Prudential Regulation Authority (PRA) and the wider Bank of England (BoE). It examines how the regulators are adapting to and encouraging disruptive business models and also utilising new technologies to reduce regulatory burdens on business. Highlights include:

European Commission launches a public consultation on FinTech

Apr 02 2017

By Giovanni Campi and Ignasi Guardans

On 23 March 2017, the European Commission launched a public consultation on FinTech, seeking feedback on how to create “a more competitive and innovative European financial sector”. This represents an important step in the Commission’s work to define a European policy and regulatory framework for FinTech, after the set up of an internal Financial Technology Task Force in November last year.

The European Commission outlines three core principles that will underpin its FinTech approach: i) technological neutrality; ii) proportionality; and iii) market integrity.

Bank of England’s FinTech Accelerator launches a new community

Mar 28 2017

By Jonathan Lawrence

The Bank of England’s FinTech Accelerator launched a new community on 17 March 2017 which brings together FinTech-related organisations. The community has three aims: to share developments, trends and insights; to make sure the Bank is engaging with different FinTech firms from across the sector; and to enable firms with an interest in FinTech to network, supporting the development of the sector. Community members will be invited to meet the Bank two to four times a year to share updates on trends and developments in the sector. The Bank will also hold quarterly networking and knowledge-sharing events, and publish summaries of the topics discussed. The list of initial community members is here. Summaries of the topics discussed at these events will be made available afterwards via the Accelerator’s website.

The Bank has also decided on the firms it will be working with for the third round of its Proofs of Concept (PoCs):

MindBridge AI: MindBridge’s AI (artificial intelligence) auditor detects anomalies in financial transactions and reports using data science, machine learning and artificial intelligence. The Bank is using this PoC to explore the benefits of machine learning for analysing the quality of regulatory data input.
Ripple: The Bank is carrying out a PoC with Ripple to demonstrate the synchronised movement of two different currencies across two different real-time gross settlement systems. The aim is to show how this kind of synchronisation might lower settlement risk and improve the speed and efficiency of cross-border payments.

Adapt or die, the reality for retail banks during a digital revolution

Mar 26 2017

By Cameron Abbott and Giles Whittaker

Traditional banking is a thing of the past, at least according to 203 senior retail banking executives surveyed by the Economist Intelligence Unit.

According to an Economist Intelligence Unit report for Temenos, the EU’s Second Payment Services Directive (PSD2), which will force banks to provide interfaces, APIs and data to third parties, is set to “tip the scales between banks and FinTechs for customer loyalty.” More than half of financial transactions will be made through FinTech companies rather than traditional retail banks by 2020, as the latest EU payments directive unleashes competition.

Financial Inclusion and Robust Regulation Are on the Table as OCC Pushes Ahead With Fintech Charter

Mar 26 2017

By Anthony Nolan, Judith Rinearson, Jeremy McLaughlin, and Eric Love

On March 15, 2017, the U.S. OCC issued a Draft Supplement to its Licensing Manual (Supplement) to progress its proposal to roll out a special purpose national bank (SPNB) charter for fintech companies.

The Supplement outlines the process by which a fintech company may apply for a SPNB charter, and the considerations the OCC will take into account when evaluating such applications. In addition, the Supplement reiterates the OCC’s determination that the SPNB charter would be “in the public interest” because it would provide “uniform standards and supervision,” “support[] the dual banking system,” promote “growth, modernization, and competition” in the financial system, and encourage fintech companies to “promote financial inclusion.” It also makes clear the OCC’s determination to promote financial inclusion and to rebut criticisms that the SPNB charter would represent a light touch regulatory regime. The SPNB is not a ‘bank-lite’ charter; an “applicant that receives OCC approval for a charter becomes a national bank subject to the laws, regulations, and federal supervision that apply to all national banks.”

Comments on the Supplement are due by April 14, 2017. Because the Supplement represents a significant step forward in the OCC’s push for a fintech charter, we expect that there will be many commenters. Even before the OCC’s issuance of the Supplement, the proposed charter garnered substantial interest from key Members of Congress, state regulators, industry groups, and other stakeholders. For a more detailed analysis of the Supplement, see our Legal Insight here.

UK Government’s digital strategy

Mar 20 2017

By Jonathan Lawrence

The UK Government’s Digital Strategy published on 1 March 2017 contains an overview of actions the Government and regulators are taking to support the UK FinTech industry:

supporting UK banks to deliver Open Banking through a fully open application programming interface (API), providing access to authorised third parties by Q1 2018. Third-parties will then be able to access consumers’ data in real-time
supporting industry to design and deliver a pensions dashboard by 2019 – a digital interface where an individual can view all their pensions in one place
working with Tech City UK on a FinTech Delivery Panel to set out a long-term strategy for UK FinTech and identify key industry initiatives. This panel comprises key representatives from the FinTech sector, existing financial services sector, and the Financial Inclusion Commission
appointing regional FinTech envoys to help the growth of FinTech across the UK. To date, regional FinTech envoys have been appointed for the North of England and Scotland
showcasing UK FinTech to investors at the annual International FinTech Conference, to take place in London on 12 April 2017

OCC Releases Draft Licensing Manual for Evaluating Fintech Bank Charter Applications

Mar 20 2017

By Anthony Nolan

The Office of the Comptroller of the Currency today issued its draft licensing manual in furtherance of its proposal to grant national bank license to fintech companies. This provides additional detail on evaluating charter applications from fintech companies that engage in the business of banking. This is an interesting riposte to the Republican letter asking the OCC to delay the fintech charter process. A link to the OCC’s press release appears here.

Regulators in the UK and Japan enter into Co-operation Framework

Mar 20 2017

By Jonathan Lawrence

The Financial Services Agency of Japan (JFSA) and the UK’s Financial Conduct Authority (FCA) have entered into a Co-operation Framework to support innovative FinTech companies in their respective markets. For the full text of the agreement by way of an exchange of letters, see Letter from the JFSA to the FCA and Letter from the FCA to the JFSA.

This Co-operation Framework will provide a regulatory referral system for innovative financial businesses that have been offered support by the JFSA or the FCA through their respective FinTech innovation functions, or would qualify for such support (an Innovator Business). The FCA launched Project Innovate in October 2014 which is led by the FCA’s Innovation Hub. The JFSA established its FinTech Support Desk in December 2015 as a one-stop contact point for FinTech businesses.

Category:FinTech Industry & Regulation