UK – Page 5 – FinTech and Blockchain Law Watch

FCA payment services rule making powers extended

Jul 26 2017

The UK Financial Conduct Authority (FCA) has issued a statement expressing concern that payment institutions and e-money institutions may have used currency converter tools in relation to their currency transfer services in a misleading way. Tools which convert currency at the interbank rate may be used in such a way as to give consumers the misleading impression that the interbank rates shown are available to them, rather than the materially inferior rate that customers are likely to achieve. Consumers may not become fully aware of the inferior rate they are likely to achieve until an advanced stage in the customer journey, commonly after a customer registration process has been undertaken. At that stage, consumers may be unlikely to shop around.

Increased access to the Bank of England’s payment systems

Jul 21 2017

By Jonathan Lawrence

The Bank of England has widened access to the United Kingdom’s interbank payments system to increase competition by FinTech providers. The Bank announced on 19 July that a new generation of non-bank payment service providers (PSPs) will now be eligible to apply for a settlement account in the Bank’s Real-Time Gross Settlement (RTGS) system. The RTGS system has traditionally held the accounts of financial institutions in order to promote inter-bank settlement. Holding their own settlement account at the Bank will enable these non-bank PSPs to apply, for the first time, for direct access to the UK’s sterling payment systems that settle in sterling central bank money, including Faster Payments, Bacs, CHAPS, LINK, Visa, and, once live, the new digital cheque imaging system.

Bank of England FinTech Accelerator Proofs of Concept

Jul 17 2017

By Jonathan Lawrence and Judith Rinearson

On July 10, 2017, the Bank of England (the “Bank”) published summaries of their third round of Proofs of Concept (“PoC”), completed by its FinTech Accelerator.

The FinTech Accelerator was established in 2016, and works in partnership with firms to understand the new technology they may be working with and how FinTech innovations could be utilised within central banking. These PoC provide valuable understanding in respect of FinTech trends and support to its continued development by providing a platform for those firms to demonstrate their solutions for real issues and knowledge from BoE experts.

A new finance association for UK

Jul 05 2017

By Jonathan Lawrence

A new trade body has been launched in the UK – UK Finance. It has been created by combining most of the activities of existing UK finance associations – the Asset Based Finance Association, the British Bankers’ Association, the Council of Mortgage Lenders, Financial Fraud Action UK, Payments UK and the UK Cards Association. It operates across 300 companies and societies, who themselves operate in finance, lending, banking, markets, fraud prevention and payments. Its role will be to help its members build customer trust, facilitate industry-wide collaboration and innovation, and work with policy makers and regulators in the UK, European Union and at a global level to ensure that the UK retains its position as a global leader in financial services.

UK Finance recognises that FinTech is generating enormous possibilities for its members. Its CEO, Stephen Jones, envisages UK Finance’s collaboration with the sector will form one of the central pillars in the organisation’s role of ensuring all its members can deliver the latest advances to their customers. Peter Smith, the CEO and co-founder of Blockchain, represents the FinTech industry on the UK Finance board.

UK regulatory sandbox’s second cohort announced

Jun 29 2017

By Jonathan Lawrence

The UK Financial Conduct Authority (FCA) has provided an update on its regulatory sandbox and unveiled the list of firms that were successful in their applications to begin testing in the second cohort of the sandbox. The regulatory sandbox allows businesses to test innovative products, services, business models and delivery mechanisms in a live environment. It is part of Project Innovate, an initiative begun in 2014 to coordinate the FCA’s approach to FinTech.

UK P2P lending platform to launch Innovative Finance ISA

Jun 19 2017

By Jacob Ghanty and John Van Deventer

RateSetter, a UK P2P lending platform, has raised £13 million in its latest round of fundraising as it prepares to launch its “innovative finance” ISA (IF-ISA). The IF-ISA allows investors, or lenders, to earn interest free of income tax. Before a P2P platform can offer its own ISA, it must be fully authorised by the Financial Conduct Authority (FCA).

This comes at a time of increased regulatory scrutiny of the P2P lending sector. There is growing frustration in the industry at the prolonged regulatory approval process for IF-ISAs. This is a function of high numbers of applications before the FCA and a high level of regulatory scepticism over this type of product.

UK industry-led sandbox consultation report

Jun 15 2017

By Jonathan Lawrence

The UK Financial Conduct Authority (FCA) asked Innovate Finance to chair a consultation on an ‘industry-led sandbox’. Innovate Finance is an independent not-for-profit membership association representing the UK’s global FinTech community. A report on their consultation on this industry sandbox has been published.

For the purposes of the consultation, an ‘industry sandbox’ was defined as ‘a shared off-market development environment where developers of FinTech solutions can access data, technologies, and services from different providers in order to validate innovative ideas or address common industry challenges‘. This sandbox would be set up and run by the industry to enable technology business to test their solutions (either virtually or live with limited participants) before they reach the market. It would also allow businesses and regulators to collaborate on developing the UK FinTech industry.

Regulators in the UK and Hong Kong sign co-operation agreement

May 30 2017

By Jonathan Lawrence

On 12 May the UK Financial Conduct Authority (FCA) entered into a co-operation agreement with the Securities and Futures Commission (SFC) in Hong Kong to foster collaboration in support of FinTech innovation. Under the agreement, the FCA and SFC will co-operate on information sharing and referrals of innovative firms seeking to enter one another’s markets.

The FCA signed a similar agreement with the Hong Kong Monetary Authority in December 2016 (see previous post). This new announcement means that the FCA now has agreements with a number of key regulators in Hong Kong. The agreement follows the creation of the FCA’s Innovation Hub in 2014 and the SFC’s FinTech Contact Point in 2016.

The changing nature of payments in the US and UK

May 11 2017

By Judith Rinearson

Rarely does a FinTech lawyer have the opportunity to experience payments regulations in two very different locations. US K&L Gates Partner, Judith Rinearson, had the opportunity to do just that when she spent 20 months in London working as a payments regulatory lawyer. Her insightful commentary on the two different approaches to payments regulations was recently published in the UK’s Law 360.

To read the article, click here.

FCA outlines FinTech and RegTech priorities for year ahead

Apr 20 2017

By Jonathan Lawrence

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.

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