Sprung Link Text
In an increasingly virtual world, law and regulation act as a crucial safety net for businesses. The nature of that safety net varies, depending on the particular legal jurisdiction where the businesses are located. Global providers in the FinTech arena can be mobile and nimble and must choose their home country for these purposes carefully. The U.K. has leading-edge regulators, world class courts, a liberal regulatory landscape and a predictable legal system, based on the “common law” precedent-based method which is preferred globally. As such, the U.K. is uniquely positioned to develop reliable and trustworthy FinTech services and to build on its legal and regulatory strengths to protect customers worldwide.
In truth, most countries are not well positioned to protect consumers participating with virtual businesses, since their only tools are to create regulations for foreign service providers or to prevent those providers from delivering services and products virtually. This type of regulation is difficult to police, quite apart from the fact that it reduces customer choice. These factors mean that the legal and regulatory regime where the global provider is located is key to ensuring that services and products are trustworthy, reliable and attractive. Ultimately, the consumer is in charge, and will trust companies from those countries or centres which prove to be the most credible. In the U.K., open banking and open finance provide an unprecedented opportunity for U.K. FinTech activities.
The U.K. is a pioneer of open banking, with a burgeoning market compared to other countries. At the start of 2021, over three million U.K. consumers and businesses were using open-banking enabled products, according to Open Banking Limited, the body set up to deliver open banking in the U.K. The U.K. has empowered consumers to switch between different U.K.-based providers, which has resulted in healthy competition, increased innovation, and more choices for consumers. By minimising repetitive checks, the U.K. regulatory system creates efficiencies that ensure all U.K. service providers are able to compete globally – and with each other – in offering services and products based solely on quality.
The U.K. Financial Conduct Authority recently proposed a series of rule changes intended to support further growth in the U.K.’s open banking industry. Regulators and government bodies are now working with the private sector to develop the nascent open finance market. The U.K. Government also proposed legislation to mandate industry involvement in its “Smart Data” initiative, which will establish a more secure and efficient system for storing and sharing data across industry sectors. Consumer protection is crucial: adequate (but not over-engineered) data protection rules are a key priority for the U.K. regulators, and a Government consultation published earlier this year laid out proposals for a “digital identity” framework governing the use of digital IDs for identity verification purposes. In the coming months, the FCA and Government bodies plan to discuss the feasibility and design of any future legislative template for open finance. The FCA will also work with industry and the Government to assess the need for an open finance roadmap and a set of industry-led common standards to support the open finance sector.
At this critical moment, the FinTech industry and the U.K. should align themselves in forging a new marketplace based on customer choice and ease of access. The U.K.’s common law legal system, with its basis of freedom and choice, allows for predictability, trust and evolution at one and the same time. With this invaluable foundation, open banking and its emerging cousin, open finance, now light the path, and show consumers from all over the world the benefits of the U.K.’s highly competitive FinTech services.