Last week the Financial Conduct Authority (FCA), the principal regulator of the UK’s financial services sector announced a collaboration with 11 other global regulators and government entities called the Global Financial Innovation Network.
Christopher Woolard, the FCA Executive Director of Strategy and Competition commented, “The creation of the Global Financial Innovation Network (GFIN) is an important next step for organisations like ours who are actively engaged in understanding and harnessing the benefits of innovation in financial services for consumers, while managing the potential harm.”
So why is this an important development?
Digital innovations offer the promise of global borderless benefits for consumers and businesses.
While Amazon, Google and Facebook are now facing jurisdictional challenges around consumer data protection, market dominance, and the payment of tax, they have had relatively unfettered access to global markets for many years.
Financial services like banks and insurance companies are highly regulated with laws that vary greatly by country. This makes it difficult and expensive for digital innovators to scale outside of their own countries, an expense often borne by the end customer.
A new era of proactive and innovative global regulators has set out to improve this by working with digital innovators at the onset to help test that their solutions are fit for purpose and do not harm consumers. Part of this process is identifying upfront potential risks to the end customer like mis-selling, and mitigating those future risks.
GFIN can find its origins in the FCA’s Sandbox Report in 2015 which delivered the Regulatory Sandbox and the Global Sandbox Consultation, now resulting in the creation of GFIN. The FCA Regulatory Sandbox, launched in 2016, takes in cohorts of innovative firms from across the world with the objective of allowing firms to test innovative products, services and business models in a live market environment, while ensuring that appropriate safeguards are in place.
Woolard and his FCA innovation team have written the playbook on regulatory innovation in financial services and it has been copied by regulators around the world. At last count, there were over 30 financial regulatory sandboxes. The GFIN can help bring together this knowledge and experience to share and accelerate digital innovation in the financial service sector to consumers across the world.
A number of global regulators will join the FCA in the network: Abu Dhabi Global Markets (ADGM); Autorité des marchés financiers - Québec; Australian Securities & Investments Commission; Central Bank of Bahrain (CBB); United States Bureau of Consumer Financial Protection; Dubai Financial Services Authority (FDSA); Guernsey Financial Services Commission; Hong Kong Monetary Authority (HKMA); Monetary Authority of Singapore (MAS); Ontario Securities Commission; and Consultative Group to Assist the Poor (CGAP).
What a starting line up!