Future of fintech

Six things you need to know about fintech regulation

Paul Garbutt Paul Garbutt

The world of fintech is evolving faster than many thought possible. More than $1 billion has been invested in the industry last year and new entrants to the market continue to successfully challenge – and collaborate with – established players. Regulation has an important role to play in this ever-changing world, creating an environment for true competition and innovation.

To understand how regulation can enable innovative firms to enter the market, drive competition between incumbents, and, ultimately, create better outcomes for consumers, we asked two of our financial services experts, Paul Garbutt and David Royle to tell us six things all fintech players should know.

1 It all begins with authorisation

It needs to be less complicated to get financial services businesses authorised – the FCA should expect a surge in attempted authorisations over the next 12 months. This does not mean an easier process but rather a more efficient one. Information should be readily available online and compliance checks should be done through modern tech infrastructure, not the legacy systems like today.

2 There needs to be a level playing field

You have to treat businesses – old and new – similarly. You cannot create an uneven playing field where a new entrant is allowed to dodge the regulation that ‘traditional’ players have to go through, for example startups should face the same affordability checks as long-established organisations. Regulation evolves thanks to past mistakes and success – it should not be easily sidelined.  

3 Don’t give up on the establishment  

There can a naiveté on the part of the consumer that new businesses are good and old ones are bad. It’s not accurate: there are plenty of examples of now-defunct startups whose business models would have left consumers out of pocket. 

4 Keep inviting innovation in

Regulation must keep up with the world around it. You cannot hit the brakes as soon as uncertainty is part of the equation. Regulation cannot become synonymous with saying no and shutting innovation out – it’s up to the its practitioners to see the opportunities amidst the challenges.

5 Learn from past mistakes

If it has gone wrong before – and regulation shares some of the blame – you cannot let it happen again. Industry failures, whether in the startup ecosystem or big business, should act as cautionary tales. Effective regulation will block disaster while creating new best practice.

6 Read up on regulation

You have to invest time in learning about regulation – its intricacies and its recent happenings. If you have not worked in financial services before, it can be very difficult to get your head around regulation’s hurdles, its dos and don’ts. Read up on it or seek professional advice. Otherwise you’ll be left behind.

Our fintech inquiry is exploring several aspects of the financial services industry – from the role of regulation in fintech’s evolution to the rise of the ‘co-opetition’ era between startups and big business. Find out more and get involved.