The last month has been notably buoyant in support for the UK FinTech industry. The Autumn Statement announced a number of initiatives geared towards encouraging the continued growth of FinTech in the UK. Earlier on in November the FCA announced that its application window for the second cohort of the Regulatory Sandbox will be open between 21^st of November and 19^th of January 2017.

Autumn Statement shows support for FinTech industry

There were a number of initiatives announced in last week’s Autumn Statement which were positive news for those in the FinTech industry. The proposals include:

• £400 million of investment by the British Business Bank (the development bank wholly owned by HM Government) in VC funds to unlock up to £1 billion of new investment in innovation firms planning to scale up. The Department of International Trade will administer the fund;
• A pledge to spend £500,000 a year on FinTech specialists whose role will be to support UK businesses looking to expand internationally (and also encourage international FinTech companies to expand into the UK, such as from Singapore and China where ‘FinTech bridges’ have been previously established);
• Appointing “FinTech envoys” to decentralise activity in the industry from to the regions around the UK;
• Commission from EY and Innovate Finance an annual “State of UK FinTech” designed to inform investors on key trends and metrics in the current market; and
• Modernisation of guidance around electronic ID verification. The Joint Money Laundering Steering Group has agreed with the government that to support the use of digital only banks, new guidelines are needed to enable customers to be served entirely digitally, doing away with the need for time consuming KYC processes to satisfy anti-money laundering requirements. The proposals will be welcome news for those ready to provide alternative forms of KYC checks, such as digital IDs, biometrics, and social media identity verification.

The last initiative is an important step in the evolution of digital financial services, and will be complemented by the open API regime being introduced by PSD2.

FCA opens up application window for second round of the regulatory sandbox

The sandbox concept was introduced last year as part of the FCA’s Project Innovate. The sandbox provides a ‘safe’ environment to test new financial products in a live environment under the close supervision of the FCA. It also enables the FCA to work out where improvements are required to current regulation, or where official guidance is needed to enable better interpretation of the rules. The application window for the second round is open between 21 November 2016 and 19 January 2017.

Successful applicants to the first round were announced in November and the FCA has been working with them to agree testing methods and build in consumer safeguards for testing to commence. Those successful ranged from blockchain start-ups to Citizens Advice and GovCoin Limited (a company comprising a technology provider and the Department for Work and Pensions), and interestingly HSBC and Lloyds Banking Group.

HSBC will be testing an “app developed in partnership with Pariti Technologies, a FinTech start-up, to help customers better manage their finances”, and Lloyds, “an approach that aims to improve the experience for branch customers which is aligned with the online and over the phone experience”.

The description of the Lloyds product is somewhat vague, but the inclusion of both banks in this initiative shows that traditional banks are not sitting on their heels and are actively working on improving their offering utilising FinTech, in order to remain competitive. 

 

Jonathan Segal, Partner at Fox Williams LLP

 

Jonathan is a partner in the FinTech and Alternative Finance team at Fox Williams, a City-based Law Firm. He advises clients across the FinTech and Alternative Finance spectrum, from start-ups disrupting existing markets with innovative technology to financial institutions looking to invest in new technology.

 

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