FCA launches hub to support innovation in financial services sector

Out-Law News | 28 Oct 2014 | 3:43 pm | 2 min. read

Businesses looking to use technology to disrupt the UK's financial services sector can now apply for the Financial Conduct Authority's (FCA's) help in addressing regulatory compliance issues as part of a new initiative launched by the regulator.

The FCA has launched a new Innovation Hub (40-page / 977KB PDF) which it said can help "new and established businesses … introduce innovative financial products and services to the market".

The Innovation Hub, part of the FCA's Project Innovate scheme, offers businesses seeking to enter the financial services market to flag up their plans to the FCA and obtain an "informal steer" on how to address regulatory compliance issues that their new products or services would raise, the FCA said.

Traditional financial services businesses will also have the opportunity to apply for the FCA's assistance through the Innovation Hub when they wish to introduce either "brand new concepts" to the market or make "significant improvements" to existing ideas and practices.

New and existing financial services businesses would be able to get help with formulating plans to win or alter FCA licenses to operate in the UK under the Innovation Hub scheme.

"Both new market entrants and existing innovator businesses will be eligible for the specialist support of the Innovation Hub when preparing for the authorisations process," the FCA said. "This Innovation Hub support can be used by businesses seeking authorisation for the first time as well as regulated firms requiring a variation of permission."

"A business entering this pre-application phase will be assigned a named case officer who will work with the business to ensure it submits a high quality application. In particular, this will involve organising and participating in pre-application meetings, ensuring the business understands the authorisations process and our expectations, and acting as the primary point of contact when queries arise," it said.

The FCA said it wants to use the Innovation Hub to support financial services innovation. It said innovation "can be a powerful driver of effective competition in the interests of consumers".

"This work levels the playing field by giving all firms eager to innovate access to our expertise so that the process of joining the financial markets or introducing new products does not seem so daunting," the FCA’s chief executive Martin Wheatley said.

The FCA has set out 'innovation criteria' that businesses have to adhere to to be eligible for support through the Innovation Hub. Primarily, only innovations that the FCA considers to be in the consumer or public interest will be eligible for support.

Other criteria laid out by the FCA requires businesses to show that their innovations are genuinely "groundbreaking or significantly different" from ideas already in operation in the market. The innovation must also "offer a good prospect of identifiable benefit to consumers (either directly or via heightened competition)".

Businesses that fail to carry out sufficient research of their own into understanding the regulatory framework and how it could apply to their innovations will not be eligible for support, the FCA said. The regulator will also assess whether businesses applying for support "have a genuine need for support through the Innovation Hub".