Regulating for growth – the future is now

Future of fintech

The invite for this conference highlights that is has been a momentous summer for regulation – I would agree. 

Technology and innovation are central to both the Government’s growth plans and our own 5-year strategy[1].

We have history here – the UK remains a leading destination for global fintech investment, attracting more capital investment than France and Germany combined in the first half of this year.  Our top 11 fintechs employ over 26,000 people.

For over a decade, we at the FCA have helped firms navigate regulation, providing support through a range of world-leading services like Sandboxes[2] and Innovation Pathways[3].

Crypto

Hot off the presses, this morning we have set out proposals underlining the next stage of plans to regulate crypto[4]. 

You probably haven’t had time to fully digest them yet, so I will touch briefly on our plans.  
Crypto firms will need to be operationally resilient, and the systems and controls required to fight crime will be boosted.

Many of the standards we’re proposing to introduce mirror those expected of all regulated firms but will be tailored to reflect the specific risks of crypto. Alongside the consultation we’re seeking views on whether the Consumer Duty[5] should apply to crypto firms. 

Crypto remains a high-risk investment. However, under our plans, consumers will be better protected from poor business practices. We want to boost trust in the sector and further position the UK as a global leader.

We want to hear your views about our plans, so please do get in touch[6] with us as part of the consultation process.

Testing, testing

Something else we are testing is the way in which firms engage with us on the safe adoption of AI technologies[7]. 

We want to give firms the confidence and certainty to invest in AI systems in a way that drives growth. 

Therefore, the aim of AI Live Testing[8], which sits within our AI lab, is to allow firms to collaborate with us while we test together whether their AI services have been developed and deployed in a safe and responsible way.

This supports our commitments made in our letter to the Prime Minister on growth at the start of the year.

We have now published the Feedback Statement[9] on this initiative, which has welcomed this approach as a way of creating more transparency, regulatory clarity and accountability. Respondents also told us that it will help to address first-mover reluctance, and support firms in distinguishing between responsible AI use and higher-risk ideas. These elements are essential to building trust in the way AI is deployed in UK financial markets. 

We plan to work with 2 cohorts of firms, the first starting in early October. The application window closed this week, and we received 51 applications.

We will be transparent about what we learn with the cohorts, sharing insights with the wider industry and also using the insights to inform our wider work across the FCA. 

Helping firms on their AI journey

This month I was able to tour NVIDIA’s innovation lab in Munich and hear more about their work. The collaboration with NVIDIA has helped deliver our Supercharged Sandbox[10] which is designed to help firms who are in the discovery and experimentation phase with AI.

We received over 130 applications for this sandbox, with use cases ranging from combatting financial crime to improving financial inclusion and wellbeing along with focuses on Open Banking, Open Finance and digital identity. Applicants came from a variety of firms including large household names and smaller fintechs. 

Firms will begin experimenting in the Sandbox from October and will benefit from access to NVIDIA’s accelerated computing and AI platform, supporting competition and growth. 

Our regulatory approach[11] will remain principles-based and outcomes focused. Our existing frameworks – such as the Consumer Duty and SM&CR[12] – already mitigate many of the risks associated with AI and we will continue to rely on these established frameworks. 

We believe that with a fast-moving technology like AI, this is the best way of supporting UK growth and competitiveness. It will ensure any work we do to help firms is not only effective but also proportionate and pro-innovation.

Our approach is novel and unique to the UK – both Supercharged Sandbox and AI Live Testing – our commitment to working with firms no matter where they are on their journey with AI to support safe and responsible adoption.   

This increasingly tech-positive approach is a hallmark of what you’ll continue to see from the FCA going forward.  

Scaling up

We are committed to playing our part[13] in the Government’s growth agenda.

A key ambition set out in the Chancellor’s Mansion House speech in July was an ambition to rewire the financial system, boost investment and create skilled jobs across the UK. A key component in the Financial Services and Growth Strategy, published alongside the speech, committed us, alongside the PRA to launching a Scale-Up Unit.

The aim of the Scale-Up Unit will be to enhance engagement with fast-growing, innovative, regulated firms.

The first step we are taking is to run a Scale-Up Summit, taking place at the end of this month. To help shape this summit, we have been listening to firm feedback, including that of our UK unicorns. We want to explore how we, alongside industry and the Government, can work together to support fintechs growth in the UK.

This includes identifying and addressing real-world barriers to scaling in the UK and will explore how firms have overcome current challenges.  We are looking forward to shaping the Scale-up Unit and will say more later this year.

Opening up finance

The FCA’s 5-year strategy, has 'innovation' mentioned on every single page. It is our mission to be a 'Smarter Regulator', and innovation is key to our plans to support economic growth. 

We believe Open Finance[14] is one such vector to deliver economic growth. Fintechs and innovative firms will play an important role in the launch of Open Finance, which will build on the success of Open Banking.

Open Finance will rely on more seamless data-sharing which could help consumers by unlocking product innovation, supporting consumer financial inclusion, offering more choice and better information.

Think about the last time you remortgaged. Smart Data sharing could have made that process more frictionless and might even have opened up better rates or more finance options.

To support the development of a smart data economy, we have launched our Smart Data Accelerator.  

The Smart Data Accelerator is a catalyst to accelerate the development and implementation of Open Finance and broader Smart Data initiatives in the UK. It provides a safe space where firms, industry, policymakers, and international partners can come together to test, learn, and build the evidence that will shape the future framework.

Open Finance and a Smart Data economy thrive together: better data fuels AI, and smarter AI in turn improves Open Finance experiences, creating a cycle of mutual benefit.

Data is the lifeblood of innovation, and it is fundamental to the opportunities presented by artificial intelligence. Without high-quality, accessible data, AI cannot deliver on its promise. By opening up data sharing responsibly, we create the conditions for AI and other technologies to drive better consumer outcomes, support growth, and strengthen markets. 

But as we move forward, there are a few necessities to bear in mind. Consumer Consent must be clear and meaningful. Secure API gateways must be built, so that data can move safely across systems and borders. And consumer trust must remain central, because only with trust will Smart Data reach its full potential. 

We are also working with the Information Commissioner’s Office to address any cross-regulatory issues which may arise as the project progresses.

So what’s next? We are running experimentation, starting with SME finance and mortgages. If you are interested in joining a Techsprint, we plan to announce these later this year.

The future is bright 

The future for fintech is bright.  

We at the FCA have moved to an increasingly tech positive position. We know that technology and innovation are key to achieving growth in the UK economy.

From Open Finance, to AI, to crypto, we’re at the forefront of a major change which can make a real difference to the way we work as a regulator, the way markets work and the way financial services works for consumers.

I’m excited for the future and what we can achieve together as we continue to ensure that the UK is the best place to grow and scale a fintech.