“21,000 years in the future, humanity has settled on countless planets. Science and technology are extremely advanced. But regulation has still restricted innovation. Artificial intelligence and even advanced computers are prohibited. This is – of course – the universe of the Dune saga, by Frank Herbert. In one of his books he writes that, ’there is little that bureaucrats hate more than innovation.’”
So begins a speech given by Martin Wheatley, chief executive of the Financial Conduct Authority, yesterday. Mr Wheatley was discussing the opening of the FCA’s “Innovation Hub”, part of its commitment to support those with new ideas about how to deliver financial services – and he was at pains to emphasise that irrespective of whether he is a bureaucrat, he is very keen on innovation.
This Hub initiative – part of the FCA’s Project Innovate – is aimed at helping start-ups and those both inside and outside the regulated sector who want, in the FCA’s words, to “benefit consumers, whether by reducing hassle, reducing costs or improving products” in the world of financial services.
What will the Hub do?
There will be two parts to the Hub’s work:
1. Direct support to innovators: Here, the aim is to help innovators, whether start-ups or established firms, to navigate regulation.
• Businesses qualifying for access to the Hub will have a dedicated contact for “innovation-related queries”, including provision of individual guidance and informal steers (though “firms will rely on what we tell them at their own risk”).
• There will be support for innovators who want to be FCA-authorised. As the FCA admits, “we know the process [of authorisation] can be daunting – we want to demystify it…this means a lot of face-to-face engagement”.
• And the FCA will work with firms to test “innovative tools”, such as new ways of giving information to customers.
2. Identification of policies and processes that need to change to support innovation: The FCA plans to gather intelligence through an “extensive programme of engagement with innovators” in order to understand how the regulatory regime needs adaptation to facilitate innovation.
What are Hub’s priority challenges?
Mr Wheatley set out some priority areas that he would like the Innovation Hub to tackle:
1. Getting a bank account: Which he described as “the most cross-cutting, immediate problem facing a range of innovators…a high profile issue across the country”.
2. Regulatory uncertainty: “This creates particular problems for innovators…It means that an innovator might get conflicting interpretations from different lawyers. And talking to one lawyer is expensive enough. We hope to tackle this through the work of the Innovation Hub itself. By giving informal steers to innovators to provide clarity, or if needed, by adapting our rules to bring them up-to-date.”
3. Modernising the FCA: Including moving away from paper-based processes and improving the FCA’s website.
Addressing concerns that the Hub will in some way give start-up innovators special treatment over regulated firms, Mr Wheatley argued that this is a misconception. Regulated firms are within the Hub’s scope. and the largest regulated firms already have direct access to the regulator via their supervisors – so focusing on innovators who “have a particular need for our help in navigating regulation” is simply redressing that balance.