When Sarah Harrison, the chief executive at the UK Gambling Commission, was speaking at the UK Parliament’s All-Party Parliamentary Group for betting and gaming meeting held at Westminster in late March, she spoke about gambling operators and suppliers needing to “not be afraid to fail” when it came to innovations that might be beneficial to the consumer.
Her words were not entirely new for the sector; ever since taking over the post in the middle of 2015, Harrison’s mantra has been all about “putting the consumer first”. But in making her comments to the audience at the APPG, she also noted that there was some read across from the financial services world, and in particular with the Financial Conduct Authority’s “regulatory sandbox” idea.
The sandbox is part of the financial watchdog’s ‘Project innovate’ initiative, launched in 2014 to help foster new ideas and new thinking in the financial services industry without it being swamped with regulation before anything has even had a chance to get off the ground.
Similarly – and perhaps even more surprisingly – the Bank of England has got on the accelerator bandwagon with its own programme which is similarly aimed at fostering innovation in the UK’s financial services.
In mid-March, the Bank launched a new fintech community aimed at bringing together fintech-related organisations to engage with the bank, share insights on trends and support technical development of the sector.
It is a fascinating development and shows the degree to which the cutting-edge of fintech developments are being seen by the regulators as having the potential to transform the financial services world, not just in the UK but globally as well.
Harrison made the point that the example couldn’t be exactly followed by the Gambling Commission; it’s remit is different from the FCA (or indeed the Bank) with their explicit recognition of the need to regulate for the benefit of the consumer. The Commission is a regulation-first body which is about adherence to licensing conditions as laid down by the government. Although Harrison speaks about the consumer, ensuring operators by the law in that regard is its number one concern.
In the world of financial services, however, advances in fintech which make life better for consumers are to be embraced, according to the FCA, and encouraged as much as is possible. As the body says on its website, “financial markets need to be honest, fair and effective so that consumers get a fair deal.” In a speech made last year during the FCA’s fintech event, Christopher Woolard, FCA director of strategy and competition, stated why the body cares about innovation. “Primarily because of our duty to promote competition in the interests of consumers. One of the best ways we can promote competition is to foster disruptive innovation.”
Given the fintech backdrop, one can imagine why the Commission would look on what is happening in the fintech sector with great interest. First, it is the level of engagement with the innovators in the sector. The Bank of England community, for instance, will have bilateral meeting with the Bank itself between two and four times a year. It will also hold quarterly networking and knowledge sharing events to discuss developments, trends and insights on specific topics of interest.
Meanwhile, the Bank has also announced its third round of proof of concepts and the new firms the accelerator will be working with. One is an artificial intelligence-based firm called Mindbridge AI which has designed an auditor which can detect anomalies in financial transactions and reports using machine learning and artificial intelligence technologies. Using a small set of anonymised regulatory data the Bank is using MindBridge’s AI Auditor to explore the benefit of machine-learning technology in analysing the quality of regulatory data input.
The second is Ripple, a ‘inter-ledger protocol’ which will enable synchronised payments involving differing currencies and which promised lower settlement risk and improved efficiency and speed in cross-border payment transactions.
Similar innovation initiatives from the Commission are likely some way off – it has more than enough on its plate at present with the upcoming triennial review from the government and the ongoing Competition and Markets Authority (CMA) investigation into terms and conditions attached to bonuses and free gets. But still, if the gambling consumer is to enjoy the fruits of the technological revolution, the Commission knows full well it will have to confront disruptive technologies at some point. So maybe that sandpit idea might yet appeal.