Innovation & Regulation: Partners in the success of Financial Services

Speech by Jessica Rusu, FCA Chief Data, Information and Intelligence Officer, at Money20/20 Amsterdam.

Speaker: Jessica Rusu, Chief Data, Information and Intelligence Officer
Event: Money 2020 Amsterdam
Delivered: 8 June 2022
Note: this is a drafted speech and may differ from the delivered version


  • Can a regulator be innovative? Can regulation be written differently? And can the financial services industry see regulation as partner in promoting healthy markets and better services for consumers?  
  • The next few years will bring about significant innovation and change in financial services. 
  • When used correctly and responsibly, data and technology can offer new and innovative services to consumers. 
  • We face another period of global economic uncertainty. Nevertheless, regulators can successfully harness the same forces that are transforming financial services, to provide more effective, proactive, and scalable regulation, to support innovation and effective competition, and protect consumers.

Effective regulation through innovation 

Looking through the lens of a regulator, having spent many years in Big Tech, FinTech and traditional banking roles – I see that innovation and the role of technology in transforming markets is both a risk to Finance, as well as an opportunity.  

Regulators exist to protect consumers and markets, and to promote healthy competition.   

Therefore, effective regulation is critical to the success of the Financial Services industry as it continues to undergo transformation. 

Technology and external forces driving change 

Globalisation and technology have led to a dramatic transformation in finance, and as the worlds of legacy finance and new finance continue to collide, we see an exponential growth in innovative business models.  

Macro events including climate change, post-Brexit transition, war in Ukraine, and the rapidly escalating cost of living crisis continue to bring new challenges. 

For example, as the war in Ukraine drives up energy prices, inflation is at a 30-year high, and the Bank of England has warned that inflation might reach 10% within months, and this will have a profound impact on consumer credit.  

The Digital Revolution 

The forces of Digital Revolution continue to see growth in FinTech, as well as new business models powered by AI. And whilst this technology can be a force for good, we also see an increase in firms suffering from cyber-attacks. 

Meanwhile many consumers are considering alternative forms of finance such as Crypto. A recent study found that 55% of Bitcoin holders bought it for the first time last year. Now 1 in 5 UK residents own some form of crypto. 

Regulators are right to be concerned, particularly in light of the $60B collapse of the so-called stablecoins Luna and TerraUSD in May, with consequently distressing impacts on retail consumers.  

There continue to be significant risks, especially for retail consumers, many of whom are enticed to purchase unsuitable or inappropriate products via social media. 

The role of the FCA 

The FCA exists to protect UK consumers, ensure markets are operating effectively, and promote competition. 

In the face of so much macro and systemic Risk, the UK Financial Conduct Authority is transforming, leveraging data and intelligence to be proactive, and to be innovative in our approach to regulation. 

Our Data Strategy 

​Many of you here today will be leading your organisations through a Digital Transformation, perhaps to be more data-driven in decision making, or more customer centric, or simply more secure. The FCA is undergoing a similar digital transformation; our Data Strategy outlines the investments we are making in Technology and Data to become more innovative, more assertive, and more adaptive in carrying out our role as a regulator.  

We are transforming our platform, building new tools, and growing our capabilities to deliver changes across the entire data and technology pyramid. We are modernizing our enterprise architecture to a cloud-based infrastructure, with strengthened security and operational resiliency. 

We are working to improve the firm data we collect, as well as expanding our data with new sources of intelligence – for example we scrape over 100,000 websites daily to identify scams and fraud.  

We have expanded our Innovation services, so that we are creating both an opportunity to deliver regulation in cooperation with subject matter experts and industry, as well as to help cutting-edge firms engage with us. 

We are delivering automation, risk triggers, and insight to authorisation, supervision, and enforcement, and leveraging advanced analytics to deliver proactive intelligence, triaging of new risks, and automation in casework.  

Our updated data strategy positions the FCA as an Innovative, world leading regulator, and the Digital Unified Intelligence Environment we are building ensures we can continue to adapt to new challenges, whether it’s sanctions enforcement, crypto firms or new consumer risks brought about by rising inflation. 

The FCA’s Innovation Services 

The FCA has built a world-leading reputation for regulatory innovation, with our programmes such as the Regulatory Sandbox and TechSprints copied around the world, as well as founding and chairing the GFIN Network with over 70 international peers. 

A record £30bn was invested in UK FinTech companies in 2021. To keep pace with a rapidly changing world and deliver on our commitments we offer a range of Innovation services to promote competitiveness in the UK FinTech market. 

The Regulatory Sandbox allows businesses to test innovative propositions in the live market  with real consumers, alongside regulatory oversight. 92% of firms who have used the Regulatory Sandbox go on to become successfully authorised.

And the success rate is even higher, at 98%, for those who used the Direct Support and Advice Unit. In fact 80% of firms that were tested in the Regulatory Sandbox are still in operation. In terms of trust factors, we measured that this cohort has much higher probability of raising investment, and on average receives 15% more, vs. other non-Innovate firms.   

With all this in mind, we are not resting on our laurels, which is why we have launched Innovation Pathways this year, a new, unified firm services that provides tailored regulatory guidance to innovative businesses, including established firms, start-ups and tech firms that want to deliver positive innovations and consumer outcomes in the financial services market, including firms serving gaps in the advice market. 

Alongside this, the Digital Sandbox provides firms with access to a range of online tools and high-quality synthetic data assets to test and develop their propositions. It was launched to support products and services at earlier stages of development, namely ‘proofs of concept’, including supporting RegTech firms.

Our TechSprint programme 

Our TechSprints also bring together participants to develop technology-based ideas and proof of concepts to address specific industry challenges - covering topics including:  

  • Women’s Economic Empowerment,  
  • AML & Financial Crime  
  • ESG Data & Disclosures 

Our next event, hosted in partnership with the Payment Systems Regulator, is focused on automated push payment fraud – a mobile scam that has increased significantly, so much so that you may be surprised to hear it has now surpassed traditional card fraud.

These events help us to shine a light on issues and expand the discussion and awareness of potential solutions. By signalling regulator interest in a topic this way, we have seen investment and accelerated industry development of technologies.

The CryptoSprint 

In crypto, our remit is currently limited to ensuring anti-money laundering rules apply to crypto firms. Minimum standards expected of firms we regulate – and some we don’t – from notaries to estate agents to make sure firms are not used to funnel money to fuel crime, terrorism or war.

So we welcome the Government’s recent announcement of a flexible approach to regulation so we can proportionately deal with any risks that emerge and to receiving new powers over the promotion and marketing of high-risk assets, like crypto. 

Making complex decisions at the intersection of policy and innovative technologies is not an easy task. That is why the Data, Technology, and Innovation division I lead is experimenting with new approaches that drive us to engage with industry during all steps of the process.

With that in mind, we have leveraged the TechSprint model to support PolicySprints, designed to inform our future thinking on regulation.

Therefore, this May we held our first CryptoSprint, a 2-day event which brought together around 100 experts from academia, regulation, technology and financial services. 

This event provided an open forum to discuss and debate fundamental questions around regulation, taxonomy, and disclosure in crypto markets.

For me, this event shows we are willing to experiment with new approaches to policy discussions that focus on sharing ideas and proposing solutions in an agile and inclusive way. 

We will continue a programme of industry engagement in this area throughout the year, including a further Crypto virtual sprint which is happening this week. 

Providing more effective, proactive, and scalable regulation, to protect consumers 

I believe the next few years will bring about significant innovation and change in financial services. 

And whilst, as technophiles we find many of these changes exciting, we also see before us a collective call to action to embrace the benefits of innovation while addressing the risks to consumers.

When used correctly and responsibly, data and technology can offer faster, more efficient, and more secure services to consumers that empower them to make appropriate choices and protect their personal data.

I share this vision, and for me, my role is about equipping the FCA with tools that encourage responsible innovation, and also enable us as regulators to understand and respond to the risks as they arise.

I’m encouraged by the progress of our transformation programme, and the idea that Regulators can successfully harness the same forces that are transforming financial services, to provide more effective, proactive, and scalable regulation, to support innovation and effective competition, and protect consumers. 

Page updates

: Link changed image formatting