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COMMENT
Alastair Mitton, technology partner at UK law firm Bond Dickinson, reports on global FinTech trends from the George Washington University Forum in Washington D.C.
Around the world
The use of technology clearly continues to be of critical interest to both established financial institutions and new ‘challenger’ entrants to the market – a trend which is only set to accelerate as we see further innovation in payments, identity verification and the use of blockchain, not to mention P2P platforms and the expansion of the challenger banks. As reported recently, for example, our client Atom Bank is leading the way in the equity capital raised by the four biggest UK tech banks (alongside Monzo, Tandem and Starling).
In March, through our US strategic alliance with Womble Carlyle, I took part in a prominent FinTech forum, organised by the George Washington University Center for Law, Economics & Finance in Washington, D.C. This brought together regulators, thought leaders and industry executives from all segments of the financial technology industry to discuss the ‘The Global Reach of Financial Innovation’. In leading a panel discussion on regulatory developments in ‘FinTech Abroad’, I had the opportunity to discuss the current state of affairs with a broad range of stakeholders, including senior representatives from the Office of the Comptroller of the Currency (the primary US regulator of federal savings banks and saving and loan associations), the World Bank (very active in an advisory role in the developing world) and various FinTech think tanks.
What was striking was the general consensus (including among regulators) that FinTechs are developing much quicker than the regulatory environment in which they operate. So, not only are regulators trying to catch up, they are looking to collaborate on an international basis to share experience and good practice.
It’s often reported in the UK that this jurisdiction is one of the most progressive regulatory environments as far as FinTech is concerned, with Project Innovate, the
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FCA’s sandbox, the Open Banking initiative (allied to developments in PSD2) and more recent developments such as the FinTech Delivery Panel launched by HM Treasury/Tech City UK (in January 2017) and the Bank of England’s new FinTech community (launched on 17th March).
That view was certainly borne out by a broad cross- section of forum participants, with many other jurisdictions looking to the UK to help shape their approach. However, it’s clear that we also need to be aware of the different mandates given to regulators, as that has a direct impact on the approach FinTech businesses might expect.
Going back to the UK, for example, encouraging competition in the market is all part of the brief for the FCA. In contrast, the OCC in the US has had no such mandate, so is focussed squarely on avoiding risk/ contagion within the financial system. Couple that in the US with a combination of state level regulation as well as federal oversight and that makes for a rather trickier playing field, as can be seen from the OCC’s current experience in trying to formulate a federal charter for FinTechs.
Turning away from the perhaps more beaten track in Europe and the US, there is a lot happening in FinTech in developing markets including India, Indonesia and Mexico (to name just a few) with an explosion of activity and investment taking place in China. Perhaps there’s also less fanfare about financial inclusion than there should be. On a cross-jurisdictional basis that was the message conveyed by many, with developing countries particularly focussed on how technology can be used to address the needs of the unbanked or underserved.
Seen as a particular growth area is the use of ‘alternative
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