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Payments & FinTech Lawyer

UK’s HM Treasury publishes FinTech Sector Strategy

The UK Government’s HM Treasury launched on 22 March 2018 its FinTech Sector Strategy (‘Strategy’), a policy paper which aims at “securing the future of UK FinTech,” by preserving and extending the UK’s success in this area.

The Strategy is split into two parts, the first of which looks at how the UK Government could remove barriers to entry and growth in the FinTech sector, while the second part examines the areas of emerging opportunity in FinTech and how the benefits presented by UK FinTech can reach the whole of the country. In doing so a number of initiatives and actions are put forward, while Treasury details relevant ongoing work and support for the FinTech sector. Further, the Strategy draws upon the results of the FinTech Census, which the Government commissioned in March 2017 and which provides a review of the state of the sector.

“It is clear that the Government has been listening to FinTech firms and the challenges that they face, and this response demonstrates a commitment to developing a framework which supports the foundation and growth of FinTech firms in the UK,” said Kate Johnson, Partner at Osborne Clarke. “It also gives public recognition to the increasing importance of FinTech to the competitiveness of the UK’s financial services sector as a whole and future economic growth. In addition, many of the initiatives advanced are sponsored by or will be developed in conjunction with major players in the financial services sector. This level of institutional support should help deliver a framework that is ‘fit for purpose’ and which the FinTech sector is sufficiently incentivised to implement in practice.”

In the Strategy HM Treasury announces that the FinTech Delivery Panel, a body containing members from the financial services sector, is working with the British Standards Institute to develop a set of standards to allow FinTech firms to more easily partner with sector incumbents. The Strategy notes the benefits of collaboration between both sides but also highlights that FinTechs may currently struggle to build such relationships, partly because they may not be aware of how to meet incumbents’ expectations. “This is a big issue in the industry and I think the importance of having consistent standards is underestimated,” notes John Salmon, Partner at Hogan Lovells. “The benefits of the standards are that both the FinTechs and the incumbents only need to build the technology to work with each other once. Hopefully these standards will also include some consideration of liability and legal issues which again will give all sides the confidence to proceed. I agree there is a challenge sometimes to achieve the take up of standards. You can see with the development of Open Banking that the creation of the standards and compulsion on the major nine banks has driven change.” The standards are to be published by the end of 2019, and a number of banks including Santander and RBS have already agreed to implement them.

Another initiative involving collaboration involves the Financial Conduct Authority, HM Treasury and the Bank of England joining forces to launch a Cryptoassets Task Force, the job of which will be to analyse the risks and potential benefits associated with cryptoassets and distributed ledger technology, and how authorities should respond to them, including in terms of regulation. Salmon welcomes the setting up of the Task Force and comments that “Having the different arms of the Government come together in this way can only be a good thing and will hopefully lead to more regulatory certainty.”

“Fostering an environment of innovation is even more important in light of the uncertainty of Brexit and what it will mean for the financial services sector post the implementation period and once the future UK-EU relationship is agreed,” believes Johnson. “The competition within the worldwide FinTech industry is fierce and the Strategy is certainly a positive step towards protecting the UK’s prominence in the FinTech sector. The new FinTech Bridge Agreement with Australia, which will provide additional support for UK FinTechs selling products and services in that jurisdiction, is an important step towards maximising global market access for UK FinTech firms. The Government’s strategy should focus on extending that international regulatory cooperation further, thereby potentially reducing the reliance by UK FinTech firms on the EU market post-Brexit.”

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