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When a Regulator – in this case the FCA (UK Financial Conduct Authority) – begins a speech at a conference with the words, “I am feeling rather nervous”, it is quite difficult not to sit up and listen. These, though, were the first words of the FCA speaker, Bob Ferguson, at the Fintech Scotland 2016 conference this week.
It turned out that he was nervous because the previous two speakers had been nice about him.
It is, of course, a rare thing. Regulators are generally disliked (in fact if you are Mr Strand, you may feel even stronger than that). But the FCA, it seems, is doing interesting and useful things.
It is as if the Regulator has been watching too much X Factor.
The FCA came up with something called Project Innovate in 2012, and it is going rather well. Among the ‘boot camps’ for start-ups and the ‘themed weeks’ is a ‘Regulatory Sandbox’ and it is clever (even if it is still in an experimental stage).
It does not provide space for Regulators to meet during lunchtimes and push over each other’s sand castles. What it does do is provide a ‘safe space to test new ideas with real customers without incurring disproportionate regulatory consequences’. In other words, it allows fintech companies to test their idea on a small sample of real customers and see whether the idea will pass regulatory muster. Or at least give them a pretty clear idea.
It is, as the nervous speaker admitted, an experiment for all concerned, including the FCA.
What was slightly inspirational was that it makes so much sense. Instead of companies going through the entire regulatory approval process, being told the idea is not fit for human consumption, and having to start again, it allows fintech companies to ‘fast track’ ideas. They can also ask questions of the Regulator as they go along.
No, really.
As one delegate put it, with what looked suspiciously like a tear in his eye, “we got an answer within three days that allowed us to adapt and grow our idea. Honestly, this is a game changer in regulation’.
We can only agree with our delegate, and perhaps this should be presented as a simple, yet brilliant idea, to every other regulator on the planet.
It goes against everything we have said before about the Regulator, but well played the FCA!
With this kind of approach, the host of innovations emerging in fintech, tech and digital will not face the brick wall of regulation, just when they can see the ‘light of launch’ at the end of the tunnel.
And well done @scot_tech on another great conference. #ftscot
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