In a speech to MBA students at the Cambridge Judge Business School, the chairman of the Financial Conduct Authority (FCA) John Griffith-Jones, said that “Technological advances pose a challenge for regulators,” and he added, “rules that were designed for the paperwork era do not work for the online one.”
This problem is not unique to the UK. Regulators around the world are struggling to keep pace with evolving financial technology and industry executives across the globe often cite regulatory complexity as their biggest barrier to progress.
In a report, The ABC of Fintech, by international law firm Mayer Brown, fintech companies showed their support and commitment to industry regulation with more than 76 per cent of respondents opting for clear regulatory oversight of their industry.
This may seem odd given that regulators add extra costs, delays, and layers of complexity. However, the reality is that, for alternative finance providers to gain trust, and especially consumer trust, they need to be on the right side of the regulator.
Consumers believe that regulated industries are more trustworthy than unregulated industries.
Fintech platforms can be left in limbo for some time waiting for regulators to catch up with their latest innovation. Crowdcube spent a total of 21 months preparing and waiting for its FCA approval.
Receiving its own full authorisation from the FCA this week, consumer lending platform Guarantormyloan’s CEO, Rob Udy, called the authorisation a “significant milestone” for his business and said “It is important that both customers and lenders have the reassurance of peer-to-peer lending in the UK as a genuine, strong and competitive alternative to mainstream, traditional lending which authorisation is an important part of.”
It is clear regulation can make or break businesses, industries, and markets, and being in a holding pattern while approvals are made stalls innovation.
Commentators and platform owners are often vocal in their criticism of the slow progress of the UK regulators and Griffith-Jones said that while there is “no silver bullet” to solve these challenges, the financial sector could learn from other regulators, namely telecoms and pharmaceuticals.