Innovate Finance proposes new ‘regtech test’

Innovate Finance has called for UK regulators to introduce a “regtech test” and for a review of all existing consumer regulations in light of the Consumer Duty, in its response to an HM Treasury consultation.

Janine Hirt, chief executive officer of Innovate Finance, warned that UK fintech risks “falling behind unless our regulators continue to innovate”.

The body representing UK fintechs submitted its response to HM Treasury’s call for proposals on how UK financial regulators’ new competitiveness objectives can be best benchmarked and measured for success.

Under the new Financial Services and Markets Act, the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) will be required to promote the competitiveness of UK financial services, while the Act also enables the Treasury to set performance metrics to measure success.

Innovate Finance believes that supporting innovation among fintechs will be key to competitiveness, and has outlined to HM Treasury a set of metrics and actions to assess this, one of which is a new regtech test.

According to Innovate Finance, the test would be undertaken when the FCA or PRA introduce any new regulations to assess how technology can best enable regulatory compliance.

Innovate Finance CEO Janine Hirt

Innovate Finance also wants the UK to move away from “a ‘one-size-fits-all’ approach to regulation”, which requires small firms to meet the same requirements as larger firms, and to shift to “proportionate regimes”.

The industry body has suggested this should include the introduction of a “start-up and scale-up test” which would form part of a cost-benefit analysis of new regulations.

“Over the last decade the UK has been the leading hub for fintech globally, supported by regulators who have embraced innovation. However, as other countries are catching up, we risk falling behind unless our regulators continue to innovate,” said Janine Hirt, chief executive officer of Innovate Finance.

“The UK is one of the best places in the world to start and scale a fintech, driving talent, capital and international business into the UK economy. This is also determined by a dynamic and proportionate regulatory environment that can position the UK as the global epicentre for fintech,” she added.

A review of all existing consumer regulations to assess any duplication or contradiction with the new Consumer Duty and repeal “old ‘tick box’ regulations” is another of Innovate Finance’s proposals put forward to HM Treasury.

Hirt would like to “see new regulatory approaches that support innovation” and said she would also “welcome new policies that can create more agile regulators that can protect both consumers and market competitiveness and enable innovation in financial services”.