In Focus Collections
Meeting the pace of technological change
The regulator is encouraging the credit and collections industry to look to technology for its future
Nick Cook Director of innovation, Financial Conduct Authority
Our Sandbox and broader innovation services have been in existence for around five years now. What literally started as a two-person initiative called ‘Project Innovate’ offering regulatory feedback to innovative business models has grown into an entire innovation division dedicated to bringing disruption to financial markets in the interests of consumers. Over those five years, around 700 firms
have used these services – Sandbox, direct support and the advice unit. In terms of the sandbox, of the 47 firms that have completed sandbox testing, around 80% are operating in the market with a further 60 in the pipeline. We recently carried out an evaluation of the effectiveness of our innovation offering and overall I would say that we are pretty content with what we have been able to achieve in terms of helping new ideas get to market more quickly and start-ups getting funding or being acquired. However, I think it is important that we do
not rest on the laurels of these achievements. In fact, I am a lot more interested in what
we have not so far achieved. While we have undoubtedly seen new offerings and players entering certain areas of the market – retail banking being a prime example – we have seen significantly fewer offerings for other sectors like asset management and retirement savings. And we have not really seen true disruption at scale, with big and mid-size players not being avid consumers of the Sandbox in particular. The simple reason for this may be that
the Sandbox is not really relevant to their needs. That it does not offer supply to a demand. But this leads to the question – do we need to make certain enhancements to our services to broaden their relevance and appeal? Do we have to adapt the model to ensure it is fit for more purposes and needs than it currently is? One of the ways we are looking to broaden
Do we need to make certain enhancements to our services to broaden their relevance and appeal? Do we have to adapt the model to ensure it is fit for more purposes and needs than it currently is?
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the variety we see coming into the Sandbox in particular is by encouraging developments in certain areas of regulatory interest – trying to ensure that the Sandbox helps to produce certain desirable outcomes that we think are important. We opened cohort six of the Sandbox couple of weeks ago by specifically calling out propositions that: lMake finance work for everyone through addressing issues such as access, exclusion and vulnerability. l Support the UK in the move to a greener economy by responding to the challenges posed by climate change. l Use technology to overcome regulatory challenges – by helping regulated firms comply with their obligations. We are trying to ensure that the Sandbox helps to produce certain desirable outcomes
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that we think are important, such as around climate change and vulnerability I have already discussed the unintended
consequences that technology and change can have on some of the more vulnerable people in society so we think it important to try to ensure as much as is possible that technology acts as a force for good. Similarly, we feel that as a regulator we
have an important part to play in the fight against climate change, following on from our first ‘FinTech challenge’ focusing on green and sustainable models held last year.
RegTech and digital sandboxes The third area of focus, RegTech, has been, in my opinion, a key ‘underserviced’ area of the Sandbox until now and another area where we have to think if the services we currently offer marry up to the needs of firms. While the RegTech market is growing –
investments more than doubled between 2017 (in excess of £1,435.4m) and 2018 (in excess of £3,447.7m) – I still consider it to be the sleeping giant of the financial- services world. The reasons for this untapped potential are
undoubtedly manifold and several beyond our gift to remedy, for example the length of sales cycles and complexity of information technology systems in many of the larger institutions who are potentially significant consumers of RegTech. However, there is perhaps one key area
that we may be equipped to address. We know from our discussions with
RegTech firms, and through the TechSprints we have run, that a key struggle for RegTech
January 2020
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