Policy & Regulation Programme
Making the voice of the FinTech sector heard across key policy areas. Supporting the UK’s world-leading regulatory regime.
About the Policy & Regulation Programme
We work with regulators and government to help ensure the voice of the FinTech sector is heard across key policy areas. Our mission is to ensure the UK remains a leading global FinTech ecosystem and the most attractive hub for setting up a FinTech business. Our policy work helps promote innovation in the UK, and supports our members as they navigate the shifting political and economic landscape. The input of our members is vital in helping us to ensure that we are representing the needs of an evolving sector.
Areas of focus
The Kalifa Review
In 2020, HM Treasury commissioned an independent review of the UK’s Fintech sector. Chaired by Ron Kalifa OBE, the Review was published in March 2021. Innovate Finance provided the secretariat with our colleagues at the City of London Corporation.
Innovate Finance is working with our members and other stakeholders to push forward the Review’s recommendations.
One year on from the publication of the Kalifa Review of UK FinTech, over 70 CEOs and Founders from across Innovate Finance’s membership welcomed strong progress and called for further action. Find out more here.
Over the last ten years, FinTechs have led the way in increasing the supply of finance for the UK’s small and medium sized businesses (SMEs). These alternative lenders, including ‘challenger banks’ and platform finance, have achieved this despite regulatory and policy barriers.
Innovate Finance is working with our members and other stakeholders to secure a level playing field for alternative lenders, so they can do even more to support SME recovery and growth.
Alternative Lenders delivered for Small Businesses during Covid
by Mike Carter, Head of Lending and Investment, Innovate Finance
30 May 2022
In this blog post we assess the contribution that Alternative Lenders (non-bank lenders using digital lending platforms) made to small business (SME) SME lending during the Covid crisis, including Innovate Finance members’ part in that lending, and the challenges for SME lending looking forward and how our members can help.
Innovate Finance supports the development of the UK’s world-leading regulatory regime to ensure it strikes the appropriate balance between encouraging innovation and protecting consumers. As technology and markets develop, we support the extension of the regulatory perimeter to include new products and services. Regulation should provide effective consumer protection, trust and confidence in the market, and enable innovative products and services that meet consumer needs and strengthen financial wellbeing.
Regulation should be proportionate, maintaining UK competitiveness and not acting as a barrier or disproportionate burden on startups and scaleups; and should take a ‘digital by default’ approach that enables outcomes to be achieved through digital channels, including compliance through RegTech solutions.
Innovate Finance works with members to shape regulatory proposals, identify regulatory issues, and strengthen regulators’ understanding of Fintech.
In response to the Treasury Consultation on Future Regulatory Framework, we welcomed the Government’s proposal for a competitiveness objective for FCA and PRA and called on Government to go further: extend it to other regulators; ensure regulators have the culture, capability and capacity to make this work; introduce requirements for regulators to promote RegTech solutions; and introduce new requirements for cost benefit analysis to include a specific ‘scale up’ and ‘start up’; tests. https://www.innovatefinance.com/blogs/financial-services-future-regulatory-framework-review-proposals-for-reform/
Responding to the FCA Consultation on Consumer Duty, we have welcomed the principle of this outcome based regulation – as an approach that can better support innovation than ‘tick box’ regulation; but we argue that this should replace existing prescriptive regulation and not – as proposed – be imposed on top of prescriptive rules. We have identified a range of regulations that could be removed and called for a full review of regulations that should be scrapped when the consumer duty comes into force.
Read our analysis and response to FCA proposals for a new Consumer Duty:
Analysis of proposed reforms to financial promotion rules: https://www.innovatefinance.com/blogs/uk-widens-the-scope-of-the-financial-promotions-regime-for-investments-whats-changing/
In response to the Payment Systems Regulator consultation on proposals to introduce mandatory reimbursement for victims of scams, we called for a more strategic cross-government approach to tackle the consumer blight of scams – including action against the tech platforms where scams originate; highlighting unintended consequences of FOS and PSR approaches (which are resulting in criminal gangs targeting the UK); and the impact of mandatory reimbursement on investment by, and in, ScaleUps and on market entry.
Trade policy is ever more important to UK FinTech, as regulators around the world develop their approach to new products and services and the UK Government builds new trading relationships and forges new agreements on digital trade and financial services.
Our trade policy work aims to remove barriers to trade faced by UK FinTechs in overseas markets, whether through cross-border services and trade or investment and establishment of services. We are working with our members and other stakeholders to identify trade policy priorities for UK Fintech and specific issues in key markets and to engage with government and regulators to advance these.
FinTech has a huge role to play in the race against climate change: creating the tools and infrastructure, enabling consumers to take action, and embedding Net Zero in capital markets.
Our work on climate change aims to:
- Champion the role of our members and Fintech as the heart of UK’s global green finance expertise
- Celebrate what members are doing already
- Challenge them to do more
- Support members with tools and workshops
- Advocate changes needed to unleash NetZero fintech and address regulatory and policy barriers
Our Net Zero White Paper sets out the role that FinTech is already playing and can and must play in the future to achieve Net Zero. It is designed to make sense of a rapidly evolving area, to enable people in FinTech, financial institutions, government and regulators to make the most of what FinTech can do to solve the greatest crisis faced by humanity. You can download the White Paper here:
Responding to FCA proposals on sustainability labelling and disclosures we called on the FCA to go further and facilitate access to data and RegTech solutions, including making it mandatory to provide disclosures in a machine-readable format, adopt technology-led compliance supervision, and support automation of climate-related regulatory reporting
Here is our analysis of UK Net Zero regulatory approaches:
Innovation in unsecured credit
Following the publication of the Woolard Review, Innovate Finance is working to convene and enable engagement between policy makers and members on innovation in unsecured credit.
We are focusing on how to ensure the regulatory approach to this part of FinTech is proportionate, striking a balance between providing consumer protection and confidence, and fosters innovation and provides consumers with choice.
You can read our response to the HM Treasury consultation on regulation of Buy Now, Pay Later here
In March 2022, MPs and members of the House of Lords discussed Buy Now Pay Later regulation with the industry and consumer and policy organisations. You can read more here.
The Kalifa Review identified Open Finance as one of the biggest opportunities for improving financial advice and financial outcomes for consumers. As Open Finance moves from concept to reality, Innovate Finance wants to ensure the FinTech voice is heard in debates and discussions on the creation and implementation of this exciting innovation.
Our Open Finance programme has two elements: to inform and educate the wider ecosystem on what a financial services sector using Open Finance will look like and how the market stands to benefit; and to engage with regulators and government to shape how Open Finance is moved forward. In order to do this, we will be working closely with our members, creating opportunities for cross-ecosystem engagement and dialogue via roundtables, public events and content creation.
At the start of 2022 we set out the open finance agenda for the year ahead: https://www.openbankingexcellence.org/blog/2022-trends-small-steps-or-a-big-leap-for-open-finance/
Read our response to CMA proposals for future plans for an open banking entity: https://www.innovatefinance.com/news/innovate-finance-comment-on-cmas-response-on-future-plans-for-an-open-banking-entity/
Our views on CMA proposals for open banking variable recurring payments for sweeping: https://www.innovatefinance.com/news/innovate-finance-comment-on-the-cmas-definition-of-variable-recurring-payments-for-sweeping/
The UK Government has set out plans for a ‘pro-innovation’ approach to regulating AI, reforming GDPR, introducing digital ID and extending open finance. In this blog our director of Policy Adam Jackson sums up the proposals, what they mean for FinTech and what to expect next. https://www.innovatefinance.com/news/uk-government-plans-for-data-ai-and-digital-id/
Digital Assets, Blockchain & Crypto
The UK has the opportunity to be the leading international centre for blockchain enabled financial services including payments, ESG assurance and capital markets infrastructure. To capitalise on this we need a concerted effort by Government and regulators to deliver a joined up strategy and a regulatory system, with a more flexible approach to piloting regulation, that can evolve in collaboration with industry and other nations.
We work with our members across the broad spectrum of ‘crypto’ including digital assets, DLT, DeFi; covering products and services including exchanges, wallet providers, infrastructure, green finance and payment systems.
Our Director of Policy, Adam Jackson, is a member of the Bank of England’s Central Bank Digital Currency advisory panel, alongside a number of our members.
At our global summit, IFGS, in April 2022, Treasury Minister John Glen MP announced the Government’s vision for the UK to be the best place in the world to start and grow a crypto firm. Read our assessment of the Uk Government strategy: is it internationally competitive, what is needed to turn plans into tangible outcomes, and is the UK approach still relevant?
Read our response to the FCA’s consultation on extending financial promotions rules to crypto assets: https://www.innovatefinance.com/blogs/fca-consultation-paper-strengthening-our-financial-promotion-rules-for-high-risk-investments-including-crypto-assets-cp-22-2-innovate-finance-response/
Analysis of Bank of England and statements on stablecoins, March 2022:
We submitted evidence to the House of Lord’s inquiry into a Central bank Digital Currency: https://www.innovatefinance.com/blogs/central-bank-digital-currency-house-of-lords-economic-affairs-committee-inquiry-response-from-innovate-finance/
In 2021 we called for a clear UK regulatory roadmap for crypto assets and blockchain enabled financial markets and payments: https://www.innovatefinance.com/blogs/we-need-a-clear-regulatory-roadmap-for-success-to-become-a-leader-in-crypto/
Innovate Finance, working with Shearman & Sterling, has submitted a comprehensive evidence paper to the House of Commons Treasury Committee inquiry into crypto-assets. Details of the inquiry can be found here.
Innovate Finance FinTech Agenda for the New PM
We look forward to continuing to work with him and the government to further strengthen the UK’s position as a world-leading FinTech hub, and to realise the full potential of FinTech to create a more democratic, inclusive and effective financial services sector that works better for all.
We have outline six key areas for the new Prime Minister and Government to focus on. Delivering on these will ensure that the UK remains the best place in the world for FinTechs to start, scale and grow their businesses, and will allow consumers across the country to benefit from these new entrants and new technologies.
Consultation responses, research, news and insights
Please see below for recent Innovate Finance publications and responses to government consultations.
Innovate Finance and InChorus response to PRA, Bank ofEngland and FCA DP2/21 – Diversity and inclusion in the financial sector – working together to drive change – Innovate Finance and our partner InChorus responded to this discussion paper from the FCA, PRA and Bank of England to give our views on how we can accelerate the pace of meaningful change on diversity and inclusion in the sector.
Innovate Finance response to FCA CP21/21 Primary Markets Effectiveness Review – We were pleased to see the FCA’s proposals for reforms to the UK listings regime, with the proposed introduction of dual-class share structures and a reduction in the minimum free float for the premium segment. These were two key recommendations from the Kalifa Review, designed to encourage more high-growth founder-led businesses to IPO in London. We and our members believe that these proposals will certainly help in achieving that aim
Innovate Finance response to DCMS Digital identity and attributes consultation, September 2021 – This digital ID consultation focused on the proposed governance structure for this new technology. In our submission, we highlighted the need to create a level playing field to encourage as many providers as possible to participate in the digital ID framework, and we encouraged the government to think internationally, so that the UK framework can be considered world-leading and exportable.
Innovate Finance response to “A New Consumer Duty” FCA CP21/13 – Innovate Finance welcomes the thrust of the new proposals for refreshed Consumer Duty , which will do much to enhance consumer protection. Nevertheless, as we highlighted in our response to the FCA, there were a few areas where we think the new Duty should take into account the specific needs of FinTech.
Lobbying policy and record
A key part of our role at Innovate Finance is to engage government, regulators and policy makers to deepen their understanding of Fintech, advocate policies and approaches to regulation that will maintain the UK’s position as a global FinTech hub and identify where and how Fintech can help achieve wider economic, social and environmental outcomes. We therefore lobby on behalf of our members, giving UK FinTech a collective voice.
In addition to legal requirements, our approach is guided by the principles of acting for the interest of the ecosystem, political impartiality, and transparency.
Read more about our lobbying policy here.