In a speech in London earlier this week, Christopher Woolard, executive director of strategy and competition at the Financial Conduct Authority (FCA) said the increasing interest internationally in innovation in financial services from governments and regulators raises "challenges".
Woolard said: "As different jurisdictions begin to set up their own sandboxes, with different models and standards, some believe a ‘Wild West’ version could emerge. This runs entirely counter to our ambitions, which we know many share, for responsible innovation, which, rather than risk diminishing outcomes for consumers, should enhance them. We also believe that a sandbox that fails to prepare firms to join the regulated market will not foster firms that succeed long-term."
To address the risk, Woolard said the FCA said greater collaboration globally is needed.
"Along with a number of colleagues internationally we believe that by building a common understanding of the principles of good innovation we can benefit both stronger international co-operation, and help secure the long-term future of the industry," Woolard said. "So a significant focus for us will be seeking to develop this consensus through bodies like the G20 and IOSCO."
In his speech, Woolard also confirmed that the FCA is in the process of agreeing a new cooperation agreement on fintech with its counterpart regulator in India. The FCA has already put in place agreements with the Financial Services Agency of Japan (JFSA), the Ontario Securities Commission (OSC) in Canada and the Hong Kong Monetary Authority (HKMA), as well as regulators in Australia, Singapore, South Korea, and China.
The FCA's fintech ties with the other regulators are part of its 'Project Innovate', which among other things offers businesses the chance to test new ideas in a regulatory sandbox – a light-touch regulatory environment.
As well as building links internationally as part of a "new phase" of Project Innovate, Woolard also outlined the FCA's plans to expand the reach of Project Innovate within the UK. He said the FCA plans to deliver greater support to fintech businesses based "in the Edinburgh-Glasgow corridor and the Leeds-Manchester area".
"We will work with the local authorities, development partners and firms in those locations, as well as the Scottish Government and the Treasury's digital envoys," Woolard said. "Our aim, as for the wider work we do, will be to encourage the emergence of more innovative firms, whether home grown or inward investors."
"We will start from next month by bringing our people to those firms, offering a regular presence from the Innovation Hub able to give guidance and informal steers to firms seeking to innovate. And as we have done throughout our innovation work, we expect to experiment, we will evolve what we do and we will do what works," he said.