Fintech companies argue that giving banks a tight grip over the flow of information will allow the big lenders to snuff out new competitors.For their part, financial technology companies argue that giving banks a tight grip over the flow of information will allow the big lenders to snuff out new competitors and make it harder for customers to compare rates and prices for different services.
Category Archives: Digital, NEO, Open Banking, Open Finance
Banks, fintech startups clash over ‘the new oil’ — your data
Politico | Victoria Guida | Feb 7, 2020
Fintech companies argue that giving banks a tight grip over the flow of information will allow the big lenders to snuff out new competitors.
The nation’s banks are locked in a bitter fight with upstart technology companies over the control of their customers' financial data — and the consumers whose personal information is at stake are mostly spectators.
JPMorgan Chase, PNC and other major lenders are threatening to limit the access of middlemen that are hired by financial apps like Venmo and Betterment to grab customers' account information from the banks' websites. The banks warn that financial information is less secure in the hands of these data aggregators, a worry shared by federal investigators, and that there are few controls over the sale of the information to third parties like hedge funds.
See: Minister Morneau announces second phase of open banking review with a focus on data security in financial services
The ability to maintain access to that data is so valuable that the powerful middlemen, which work on behalf of thousands of financial apps, are doing something that companies almost never do: asking the government for more oversight to prove that they are responsible handlers of sensitive data.
“Data is the new oil,” said Linda Jeng, a senior fellow at the Georgetown Institute of International Economic Law and a former Federal Reserve official.
“If you have access to data, then you have the ingredients to build better services.”
The conflict is part of the existential challenge that the fintech upstarts are posing to banks and their record profits as they increase the speed and convenience of transferring money or getting mortgages approved. Much of the battle is over information, and it has escalated in the absence of government rules establishing that customers themselves control their own personal data, as in the European Union.
The dispute, brewing for some time, is now spilling out in the open. JPMorgan Chase is making moves to cut off the ability of data aggregators to obtain customer data without the bank’s consent.
See: Fintechs divided on screen scraping ban
The middlemen — called “screen-scrapers” because of the way they get the data — include Plaid and Yodlee, which most payment app users might not even know exist. They use a consumer’s bank username and password to pull account information, a right that people sign over to the digital payments companies when they do business with them, giving the aggregators the ability to grab more data whenever they like.
The aggregators have access to any data that the customer can see when they log on to their bank's website — account balances, transaction data, mortgage information.
JPMorgan wants to require companies to negotiate a standardized set of data fields that they can request. In December, it reached a deal with Yodlee to that end and has previously struck agreements with other aggregators.
"We want to protect our customers’ financial data while giving them more visibility and control when using the financial apps," said Paul LaRusso, managing director of digital platforms at JPMorgan Chase.
Meanwhile, PNC has already started restricting the information that aggregators like Plaid can get using customer-provided login information.
“PNC’s goal is to accommodate our customers’ choice to connect to the fintech apps they want to use while also ensuring that those connections are made safely and securely,” said Karen Larrimer, PNC’s head of retail banking.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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State of Financial Services Industry Report 2020 (Oliver Wyman): When Vision and Value Collide
Olivery Wyman | Chris Allchin and Ted Moynihan | February 2020
Financial institutions face a big challenge: creating the business of the future from the legacy they have today. There is considerable investment and activity underway to make this transformation. Firms have set up incubators, accelerators, and innovation teams, often consuming considerable management attention.
They have hired chief digital officers and teams, and rolled out new ways of working. Some breakthroughs are occurring. Yet positive impact on the bottom line has been rare, and no firms we speak to are happy with the rate of change.
See: MOF: Consumer-directed finance: the future of financial services
Until recently, this has been a concern but not a crisis. Pressure is now building. Investors, analysts, and management teams in the past year have begun asking questions about the lack of progress from the considerable investments being made.
The outside threat is growing, not receding, with the big technology companies positioning themselves in financial services. The industry also faces difficult macroeconomic conditions that will put investment budgets under strain.
In short, financial institutions are struggling to make and deliver on the investments they need to be successful in 10 years’ time, while delivering value for shareholders in the short-term. This is now revealing a major tension in the industry between two opposing mindsets:
The vision mindset is focused on building the firm of the future
It foresees structural changes to the industry driven by new technology, changing value chains and ecosystems, new rules of competition, and disruptors setting those rules. A full transformation effort is seen as necessary, with a three- to seven-year investment horizon and a growth narrative that emphasizes customer value.
The value mindset is focused on delivering financial returns
It sees an industry that has adapted to successive waves of technology and focuses on cost and capital responses to slow growth. Investment should be made only where concrete returns are expected, with an impact in the next one to three years.
See: Inflection point:Seven transformative shifts in US retail banking
The industry needs a mix of both mindsets. But in many cases, one or the other has come to dominate. When the value mindset dominates within firms, the result is myriad small changes with known but low-impact outcomes. Short-termism leads to increasingly outdated legacy technology, which holds back future productivity improvement, and new growth opportunities rarely amount to anything substantial.
Continue to the full article --> here
Download State of Financial Services Industry 2020 (32 page PDF) -> Here
Top 5 Killers of Banks' Technology Projects | | Feb 7, 2020
Why are tech projects dying a slow death? We’ve identified five drivers of their demise and how they can be brought under control.
Killer #1: A Battle of Opposing Priorities
For any program to deliver, a compromise is needed between how much the leaders want to focus on the vision for the future versus revenue improvement in the short term. Without a balance of the two, projects fail, because either their scope is too narrow to create impact or leaders are so ambitious that they keep spending but never finish.
The Treasury Committee in the U.K. set boundaries in this area. It stated that if management teams are so focussed on the short term that customers become exposed to risks from old tech systems, then regulators must intervene.
Killer #2: An Absence of Experts at the Very Top
A clear differentiator between organizations that successfully deliver on technology projects and those that fail is a technical leader on the board or executive committee. A quick glance through the annual reports of the top 10 retail banks in the U.K. shows a clear absence of deep IT, technology or digital experience in most leadership teams. This must change.
There are many benefits to having a senior leader with business acumen and technical know-how. For example, they can ensure new technology capabilities built in disparate parts of the business use standardized and compatible technologies.
Furthermore, a CIO who has influence only within the technology team is a wasted asset. Working at an executive committee level allows a chief information officer to collaborate with HR to ensure the technologies deployed across the business align with the level of technical skills within the existing workforce or establish a training plan.
Killer #3: No Plan for Crossing the Finishing Line
There have been cases where businesses are itching to launch a neat new data stack and a fancy app for customers, but missed one vital detail: how to move their millions of customers from the old system onto the new one.
With the excitement around developing a new product, it is easy to forget about what’s needed at the very end, like data migration or scalability. It’s a similar story for apps. More than half of app development time is needed just to get it working behind the scenes.
Leaders need to ensure their tech teams focus on what makes a real difference to the project’s main objectives, such as security and reliability, and know what it takes to move from development to testing to launch.
Always sacrifice scope before quality.
Continue to the full article --> here
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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UK: Open Finance: The FCA Consults On How To Transform The Financial Services Market
Hogan Lovells | James Black and Neelam Hundal | Jan 22, 2020
The UK Financial Conduct Authority (FCA) is consulting on the opportunities and risks presented by open finance, building on the progress and success of open banking. The consultation is relevant not only to banks and payment institutions, but to a very broad cross-section of financial services, including consumer credit firms, investment managers and others. It gives firms an insight into the regulator's vision for the future of the UK financial services market. The questions asked will shape its approach to policy in the next few years and therefore shape firms' agendas as well. Now is the time to have your say.
Following fast on the heels of open banking and PSD2, the FCA recently published a call for input to explore opportunities and risks arising from open finance. Responses can be submitted through an online response form by 17 March 2020 – now is the time to make sure your voice is heard.
Don't worry if you're not sure where to start with your response – we're here to help with our Quick Start guide.
What do you mean by open finance?
The FCA puts forward a definition of open finance, which is based on:
- a financial services customer who consents to a third-party provider (TPP) accessing their financial data in order to offer tailored products and services;
- TPPs being permitted to collect financial data to present to the customer ("read" access) and initiate transactions on the customer's behalf ("write access").
In other words, requiring all financial services providers to securely expose customer data to third parties to enable the provision of innovative services and improve customer outcomes, in the same way as banking is being transformed already.
Some of the benefits the FCA sees open finance bringing to the market are: personal financial management dashboards, automated switching and renewals, new advice and support services and more accurate creditworthiness assessments. These are, of course, the benefits it expects to see from open banking, so the key question is the extent to which access to additional financial services products will enhance and improve these services – and of course whether the cost-benefit analysis justifies the move.
There is an assumption that access would be provided through application programming interfaces (APIs) on the basis that the FCA considers APIs a better route of access than using a modified customer interface, by reducing barriers for TPPs and enhancing security.
I'm not a bank – should I care?
In a word – yes! The FCA is looking at a very broad cross-section of financial services. As well as banks and payment institutions, this consultation is relevant to consumer credit firms, general insurers and insurance intermediaries, investment managers, life insurers and pension providers and mortgage lenders (among others).
See: MOF: Consumer-directed finance: the future of financial services
Why is the FCA so keen?
The FCA is looking to lead the public debate on open finance and has set up an advisory group to drive forward its future strategy. The advice of that group, which comprises industry experts; consumer and business representatives; government departments and academics, has also been published.
The FCA clearly believes that the progress of open banking to date, and the customer propositions it has given rise to, has already been sufficient to justify the principle of open banking. This has prompted it to consider the benefits that could be achieved by expanding the principle into other areas of financial services.
The first questions it asks are what actions it can take to ensure the potential of open banking is maximised and for views on what open banking teaches us about the development of open finance. There will of course be a wide range of views on these questions and it will be important for the regulators to hear all of them.
Who's going to pay for this?
This is probably the biggest question of all, and is not explicitly answered by the FCA. The implication of the consultation, however, is that account providers would be expected to fund their own costs of complying with any new rules. This is not surprising, given that open banking and PSD2 interfaces had to be developed and funded by the account providers.
The consultation does, however, recognise that the cost may not be insignificant and that it is difficult to identify the actual costs of delivering open banking since there is inevitably some overlap with work that would have been required in any case.
See: NCFA and Toronto Finance International partner to co-host Canada’s ultimate fintech experience
Many banks will probably feel that the overlap is minimal and that the costs can be more easily identified than the FCA believes. The FCA does leave open the possibility of providers charging for use of APIs (something effectively prohibited under PSD2), which may make the proposition more attractive.
Risks arising from open finance
Perhaps the most interesting area of the call for input relates to the FCA's identification of potential risks that open finance could create:
- the exclusion of particular categories of customers (e.g. those who opt out of data sharing) and disadvantageous pricing for those customers;
- misuse of customer data;
- poor consumer outcomes, for example, auto-switching could lead to disengagement from customers or customers being solely focused on price over other factors affecting suitability, and reducing friction associated with larger transactions may lead to harm where advice is not taken;
- a negative impact on competition if, for example, firms try to tailor products to match dashboard features, TPPs oversimplify choice or if firms do not offer equal access to TPPs; or
- operational concerns, including upfront costs of investing for established firms that could take away from other development opportunities.
See: Fintechs divided on screen scraping ban
While these are the obvious risks, providers will want to consider both whether the FCA has accurately evaluated and articulated these risks, and whether there are other risks the FCA has not yet identified. It is not clear, for example, how the FCA's proposals would fit with existing initiatives such as the pensions dashboard.
Continue to the full article --> here
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Stunning Japanese Admission About China May Foreshadow Digital Currency Breakthrough
Forbes | Steven Ehrlich | Jan 27 2020
There are at least 18 central banks developing a form of sovereign digital currency, according to a recent survey from crypto news outlet The Block. Some such as China see the efforts as a way to reduce fraud, increase financial transparency, and support flagging economic growth. Others like Iran and Venezuela are looking for ways to evade global sanctions. Finally, tinkerers such as the European Central Bank are making somewhat symbolic efforts as a hedge against Libra, to placate impatient innovators, and use them as an opportunity to learn.
See: Central Bank Digital Currency and Fintech in Asia
For this latter group, it would be great if something beneficial comes out of this experimentation, but there is no real sense of urgency.
The same cannot be said about Japan, where senior leaders took the extraordinary step of not only reversing recent guidance from the Japanese Central Bank saying that they weren’t pursuing a form of digital currency, but admitted that a primary reason for doing so was concern about what may happen if China’s far more advanced efforts succeed.
Drawing a Line in the Sand
Consider these recent statements.
This week Norihiro Nakayama, Japanese Parliamentary Vice Minister for Foreign Affairs, told Reuters, “China is moving toward issuing digital yuan, so we’d like to propose measures to counter such attempts.” Not to be outdone, earlier this month former Prime Minister and Current Finance Minister Taro Aso said that it would be a “very serious problem” if digital yuan becomes a popular means for international settlement.
See:
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Japan ruling party lawmakers to float idea of issuing digital currency
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10 ways regulators need to change in 2020
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Three Big Things: The Most Important Forces Shaping the World
Best of Enemies
There are geopolitical and economic reasons why China’s attempts to corner the market on CBDCs are seen as an existential threat in Japan. First, for as technologically advanced as Japan’s economy has become, it is highly reliant on global supply chains and vulnerable to trade tensions, such as the recent hostilities between the U.S. and China. Additionally, it has extremely limited fossil fuel deposits and must import most of these precious resources from precarious regions in their own right. As an example, 80% of its oil comes from the Middle East.
Continue to the full article --> here
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Minister Morneau announces second phase of open banking review with a focus on data security in financial services
Department of Finance Canada | Release | Jan 31, 2020
News release
News releaseJanuary 31, 2020 - Ottawa, Ontario - Department of Finance Canada
Canadians deserve a stable financial sector that is globally competitive, promotes consumer choice and contributes to economic growth. As the financial sector—like other aspects of the Canadian economy—becomes increasingly digitized, standards must be modernized to ensure that Canada continues to enjoy a strong, stable and innovative financial sector. Canadians have benefitted from one of the safest and most resilient financial sectors in the world, and they must continue to have confidence that it operates with the highest regard for privacy and security. Protecting the privacy and security of Canadians’ financial data is a priority for the government as well as for the private sector, and is crucial for maintaining continued trust in Canada’s financial system.
Today, Minister of Finance, Bill Morneau, released the findings from the first phase of the review by the Advisory Committee on Open Banking and announced that the committee will undertake a second phase of work to continue to examine the merits of open banking with a particular focus on data security in financial services.
The committee found that while some data sharing is already happening, the development of more secure infrastructure to use and move financial data would establish better protection for consumers and support other initiatives to strengthen data protection such as Canada’s Digital Charter, consumer protection standards in the financial sector and cyber security.
See: MOF: Consumer-directed finance: the future of financial services
For the second phase, the committee will work with stakeholders across Canada, beginning in spring 2020, to provide advice on potential solutions and standards to enhance data protection in the financial sector, examining issues such as governance, consumer control of personal data, privacy, and security. The committee will deliver the results of its findings to the minister later this year.
“Canadians expect their data to be secure when using financial services. I wish to thank the committee for their work to date and look forward to the results of the next phase of the review, which they will undertake with a strong focus on consumer privacy and security and in a way that continues to promote financial stability.”
- Bill Morneau, Minister of Finance
Quick facts
- Innovative, data-driven services can help consumers budget, access more affordable financial services and become better equipped to manage their finances. Canadians expect that any mechanism for sharing financial data would have a strong focus on security, privacy and the stability of our financial sector.
- Over the coming months, the advisory committee will work with stakeholders across Canada to deliver advice on potential solutions that provide secure channels for consumers to use these new services. The minister would then assess these findings.
- In 2019, the Standing Senate Committee on Banking, Trade and Commerce released a report and issued recommendations for the government to protect Canadians’ financial information by moving forward with open banking.
View the original news release --> here
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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MOF: Consumer-directed finance: the future of financial services
Department of Finance Canada | Release | Jan 31, 2020
Introduction
IntroductionBudget 2018 announced the Government's review into the merits of open banking and, as a first step in this process, the Minister of Finance appointed an Advisory Committee on Open Banking, to guide the review. The Advisory Committee is supported by a Secretariat within the Department of Finance.
The Advisory Committee was tasked with considering whether open banking would provide meaningful benefits to Canadians and to deliver a report assessing the potential merits of open banking for Canada, with the highest regard for consumer privacy, security and financial stability.
This report represents the findings and recommendations of the Committee following engagement with Canadians and stakeholders on open banking – a term this report will replace with consumer-directed finance. Over a hundred written submissions were received in response to the consultation paper, "A Review into the Merits of Open Banking," which was released in January 2019. Through the course of the review, the Committee and the Department of Finance have engaged, both through public roundtables and bilaterally, with hundreds of stakeholders.
See: Open Banking In Canada: Navigating The Future Of Money
Conclusion
The Committee recommends that the Government move forward to enable consumer-directed finance. It is an opportunity to position Canada's financial sector to compete effectively in the data and digitally powered world, and to do so in a way that puts consumers first.
There is no going back. A significant amount of data sharing is already undertaken in the market through inefficient technological workarounds that present liability and security risks for all.
Unlocking consumer-directed finance will not be straightforward. There are a number of complex policy questions to be answered; collaboration with provinces and territories that is required, and a need for multi-sector engagement and leadership from all partners. Government should acknowledge that this is a journey and take the first steps.
There remains only the question of how to move forward. In that effort, we recommend the following principles guide the Government's approach to consumer-directed finance:
- Consumer-directed finance should be focused on enabling consumer choice and meaningful control. Consumers, including small businesses, should be able to securely direct and control the use of their data in ways that benefit them.
- Consumer-directed finance should give consumers confidence and engender trust. It should be secure; respect and enhance privacy; and, be an improvement over the status quo. If something goes wrong, there must be a clear and straightforward accountability mechanism for consumers and a means to ensure that liability rests with the appropriate party.
- Innovation should guide the development of consumer-directed finance, founded on a safe, secure and standardized data-sharing mechanism. While privacy and cyber security concerns are real and must be addressed, equal weight must be given to ensuring the growth of a vibrant financial ecosystem and technological innovation.
See:
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What does the future of banking look like, according to the experts?
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Minister Morneau announces second phase of open banking review with a focus on data security in financial services
In considering a process to enable to consumer-directed finance, we recommend the following:
- There is a role for government to play in catalyzing the move towards consumer-directed finance and a role for industry to deliver leading-edge technical solutions given its expertise and innovation capacity. Regardless of the approach taken by government it should set a clear timeline for moving forward, prioritize consumer interests and the development of an ecosystem that is accessible to a broad range of stakeholders.
- Consumer-directed finance should serve as a blueprint for the Government to enable enhanced data choice and control for Canadians across all sectors of the economy. To that end, it should be done in consultation with regulators across sectors and in alignment with other related initiatives including payments modernization, updates to privacy frameworks, consideration of digital identity and the Department of Innovation, Science and Economic Development's digital and data initiatives.
- Canada has the opportunity to take advantage of the experience of other jurisdictions that have enabled consumer-directed finance. While recognizing the unique Canadian context, Canada should draw considerably on the experience of these existing models – to both benefit from successful elements and avoid pitfalls. Canada's approach must also provide for interoperability with international systems.
- Striking a balance between the imperative to act identified by many stakeholders and the need to mitigate risks is critical. The Government should consider developing a policy framework, in collaboration with stakeholders, which delivers on the above principles.
Continue to the full article --> here
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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10 ways regulators need to change in 2020
World Economic forum | Lisa Witter and Jaee Samant | Jan 31, 2020
Summary
- We need a more agile approach to regulation that supports and adapts to the change of the Fourth Industrial Revolution.
- Agile regulators can “lean into the latest technology trends and proactively shape them.”
- The UK, South Korea, Canada and other countries show how regulation can be used to foster innovation and improve technology governance.
It can take weeks to introduce a new idea or business model but years to pass a change in the law. Our rules can block innovations that can power productivity and solve our most pressing social and environmental challenges, and fail to protect our citizens as they struggle to adapt to a new era.
A more agile approach to regulation is needed to maximize the potential of the Fourth Industrial Revolution. Through the Global Future Council for Agile Governance, we have gathered the latest evidence from across the world on how our rule-making system needs to adapt to this new environment.
Here’s our 10-point pitch for how regulators need to adapt:
1. Embrace the future
Recent history is littered with examples of regulators being caught short by disruptive innovation and reacting suboptimally. Agile regulators lean into the latest technology trends and proactively shape them, using foresight methods to identify possible futures and make preparations to adapt.
See: Canadian Securities Regulators Publish Additional Guidance for Facilitating Crypto Asset Trading
Singapore has embraced foresight thinking and set up a Centre for Strategic Futures in the Prime Minister’s Office to create a “strategically agile” public service. Other governments are now following suit.
2. Focus on outcomes
Too many rules focus on process, not outcome, stifling businesses that find new ways of doing things.
Agile regulators are designing “tech-neutral”, outcome-focused regulatory regimes. Not only do these generally perform better in adapting to technological change, they can actually stimulate businesses to innovate to meet outcomes.
Japan is implementing a new governance model in areas such as health and safety. Instead of setting requirements around the design of factory facilities and processes, it looks at how well factory systems are able to monitor safety, reduce risks and intervene when issues are detected, giving businesses greater freedom in their operations.
3. Experiment and learn.
Agile regulators are creating space for businesses to trial and test new approaches – and learning about how their rules need to adapt along the way.
Many administrations have emulated the UK Financial Conduct Authority’s “regulatory sandbox”, in which regulators permit businesses to test novel products and processes for a trial period.
The UK is driving a new wave of regulatory innovation through its Regulators’ Pioneer Fund. Established in 2018, it has invested in 15 novel experiments – from stimulating tech entry to the legal services market to supporting testing of AI-powered medical devices.
4. Be responsive
Agile regulators are harnessing the power of technology to monitor and evaluate the performance of these outcome-focused regimes more effectively – enabling them to intervene in more targeted ways to uphold performance.
See: Fintech Regulatory Developments: 2019 Year in Review
The Dubai Financial Services Authority has developed its own “in-house regtech” to crunch through huge volumes of financial data and enable more sophisticated management of risk. As well as enabling better risk-based enforcement, regulators are increasingly using these techniques to monitor whether regulation is really working and, if not, to reform it.
5. Bring business on board
Laws cannot – and should not – be frequently revisited. Agile regulators are using mechanisms such as regulatory guidance and industry standards to help fill the governance gap, especially in areas of rapid technological innovation.
The UK’s Centre for Connected and Autonomous Vehicles has created a role model of public-private collaboration. It has created a code of practice to help steer the testing of self-driving vehicles without the need for repeated changes to legislation as the technology evolves, alongside working with the British Standards Institution on standards for self-driving vehicles.
6. Connect with your peers
In the Fourth Industrial Revolution, innovation often cuts across sectoral and regulatory boundaries.
See: Regulating financial innovation – going behind the scenes
Agile regulators are working with their peers to ensure a joint response to new products and services so that innovators don’t suffer “death by a thousand paper cuts” and that bad actors can’t exploit gaps between institutions. The Danish Business Authority, for example, has established a “one-stop shop” for new business models to help businesses find their way through the regulatory landscape and bring their ideas to market quickly.
Continue to the full article --> here
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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