Innovation & Regulation: FCA’s Data Strategy

The FCA has published on its role of innovation in regulation, technology and the ‘Digital Revolution’ and the FCA’s strategies to meet its statutory objectives ( to protect UK consumers, ensure markets are operating effectively, and promote competition) by leveraging data and intelligence.

The speech highlights current trends affecting the transformation of the financial services sector, including:

  • 30-year high inflation;
  • growth in fintech and AI powered business models (with a record £ 30bn invested in UK fintech companies in 2021); and
  • alternative forms of finance such as Crypto (with 1 in 5 UK residents now owning some form of crypto).

Despite the benefits of some of these trends, risks including increases in reliance on consumer credit, cyber-attacks, and the purchase of unsuitable or inappropriate products via social media.

In the face of macro and systemic risk, the FCA outlines that it is transforming by leveraging data and intelligence to be proactive and innovative in its approach to regulation. This accords with the FCA’s wider objective to become a more innovative, assertive and adaptive regulator.

The FCA is transforming its platform, building new tools, and growing its capabilities to deliver changes across the data and technology pyramid. It is also modernizing its enterprise architecture to a cloud-based infrastructure, to strengthen security and operational resilience. The FCA is also working to improve the data it collects, as well as highlighting scams and fraud. Further, the FCA states that have its own enforceable challenges, whether it is sanctioning enforcement, crypto firms or new consumer risks brought about by rising inflation.

The speech also outlines the FCA’s innovative regulatory programs including:

  • its range of Innovation services to promote competitiveness in UK fintech;
  • its Regulatory Sandbox allowing businesses to test innovative propositions in the live market;
  • the launch of its Innovation Pathways – a new service that provides tailored regulatory guidance to innovative businesses, including established firms, start-ups and tech firms that want to deliver positive innovations and consumer outcomes in the financial services market; and
  • The Digital Sandbox provides firms with access to a range of online tools and high-quality synthetic data assets to test and develop their propositions.

Regarding crypto, the FCA’s current remit is restricted to crypto firms, however it does not crypto. The FCA also held its first CryptoSprint in May, a 2-day event that brought together 100 experts from academia, regulation, technology and financial services, provides an open forum to discuss and debate fundamental questions around regulation, taxonomy, and disclosure in crypto markets. The FCA plans to continue a program of industry engagement in this area throughout the year.

The FCA recognizes that when used properly and responsibly, data and technology can be made more efficient, more efficient and more secure. The FCA’s role in this regard is to encourage responsible innovation, while understanding and responding to risks as they arise. The UK remains a world leader in fintech and financial services innovation and transformation.

“I am encouraged by the progress of our transformation program, and the idea that consumers. ” – Jessica Rusu, FCA Chief Data, Information and Intelligence Officer


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