A matter of weeks after warning against the establishment of ‘wild west’ regulatory sandboxes, the UK’s Financial Conduct Authority (FCA) has entered into a cooperation agreement with Hong Kong’s Securities and Futures Commission (SFC) to foster collaboration in support of fintech innovation.
The agreement will see the FCA and the SFC work together and share information and referrals of innovative startups looking at entry into each marketplace. It marks another stage in the journey of both watchdogs and confirms the cross-broader nature of many of the fintech companies that have emerged in recent years in both cities.
The FCA has now singed up similar agreements with financial watchdogs and authorities in China, Japan and Canada and again in Hong Kong with the Monetary Authority where an agreement was reached in December last year.
Christopher Woolard, executive director of strategy and competition at the FCA, said: “Co-operation agreements are absolutely vital in fostering an environment of Fintech innovation on a global scale. Working with other regulators internationally, we want to build a common understanding of the principles of good innovation and we look forward to working closely with the SFC.”
Woolard added that the agreements in Hong Kong were important given the breadth and speed in development of the Fintech sector, a sentiment echoed by Ashley Alder, the SFC’s chief executive. “This agreement will help both regulators stay abreast of innovation in financial services while providing innovative Fintech firms seeking to develop and grow their businesses internationally with enhanced channels for communicating with regulators.”
The FCA launched its own Project innovate in 2014 and a year later introduced the regulatory sandbox which was designed to apply a light-touch regulatory structure to startups and other innovatory ideas in the financial services sector.
The SFC’s Fintech Contact Point was established in March last year in order to encourage businesses involved in the development and application of financial technology in Hong Kong to engage with the SFC. The contact point is run by the risk and strategy unit within the SFC itself and will serve to help fintech stakeholders, fintech gambling and participants in better understand the framework and regulatory environment in Hong Kong.
Similar initiatives to Project innovate and the contact point elsewhere include the Singaporean Monetary Authority (MAS) which set up a fintech and innovation group in 2015. MAS set up three areas of focus; payments and technology solutions, a technology infrastructure office and an innovation lab.
Meanwhile in Australia the Securities and Investments Commission (ASIC) set up an innovation in 2015 in order to assist fintech startups developing innovative financial products or services to navigate the Australian regulatory system.
The trend among financial regulators represents a markedly different path to that taken – to date – by any gambling regulators when it comes to innovation. As set out by Greg Medcraft, the chairman of ASC in a speech in late April to the British Australian Fintech Forum, it is clear that the financial watchdogs more clearly see their task as being one where they need to help foster developments that will bring “critical benefits for consumers and more broadly, society.”
He added that the financial services sector and its regulators were approaching a period where innovation and new thinking is critical. “We need to be constantly imagining new ways and new possibilities – forging a new path,” he told his audience.
“Along with this, we also need responsible leadership, especially in those leaders who will drive and shape the innovative strategies of the future. Our efforts must be focused on fostering trust and confidence. Part of this story is putting the customer at the centre of your business strategy – and looking at the broader impact on our local and global community. Agile and creative fintechs are remarkably well placed to do this.”
It remains to be seen whether we will be hearing similar sentiments from any of the world’s gambling regulators where the focus is still very much on enforcement and rules-based oversight. But the degree to which regtech developments in particular will have an effect on the gambling sector as much as financial services shows that regardless of official regulatory opinion in the gambling sector, the benefits of developments elsewhere – globally - will still be felt.