The Financial Conduct Authority (FCA) this week released its five-year strategy to improve its regulatory efficiency and reform some existing policies.
With the Payment Systems Regulator (PSR) set to be merged with the overarching financial regulatory body, the FCA will look to further streamline rules and guidelines for financial institutions across the UK, including payment firms.
During a fireside chat between Payments Association Director General, Tony Craddock, and Jana Mackintosh, Managing Director for Payments and Innovation at UK Finance, the duo shared their responses to the FCA’s five-year plan, what was encouraging, but also what was missing.
At the core of the FCA’s roadmap to 2030 are four key principles it will work on to build the regulatory backbone of UK business while ensuring economic growth.
These four pillars are: becoming a smarter regulator by improving processes and embracing technology; helping consumers by ensuring the right support is available; fighting crime by going further to disrupt criminals; and supporting growth by enabling investment and innovation.
Mackintosh was pleased to see the FCA focus on growth in areas like payment features, the wider economy, Open Banking, fighting crime and UK market competitiveness as key priorities.
She did, however, emphasise the importance of execution of these four principles and particularly towards its policies around payment features, which Mackintosh admitted is “daunting as it is difficult to execute when it comes to growth and a lot of pressure to deliver on these promises”.
Mackintosh also stated she was happy to see the FCA position itself as a geographical market regulator, not just solely for the UK, but to the rest of the world. Providing clear and concise regulations is key to attract outside financial companies and investment, something that the UK fintech sector has been lacking in recent years.
This geographical footprint was further explored by the FCA in the release of its strategy plan, announcing its intentions to set up a presence in the US and Asia over the coming years.
The UK’s role as an international regulator will only help to position its leadership status and help revitalise international trade, and “financial services will be important” to this, said Mackintosh.
But the most important aspect to the FCA’s five-year roadmap for both Mackintosh and Craddock was the heavy focus on payments. This may have come as no surprise to many with the PSR merger now under the FCA’s scope, but the regulatory body did not always prioritise payment governance.
Mackintosh revealed that ,during her time as Head of Policy at the PSR, the payments regulator was initially meant to be a subsidiary of the FCA when it was first founded, which was dependent on placing payment regulation as a key aspect of the body’s policies.
Now with the merger, it appears that payment regulation across the UK will focus on becoming more transparent, less stringent and fostering growth.
What’s missing?
While the overwhelming feeling from both Mackintosh and Craddock was one of optimism, they did also share that they believe there are some factors missing from the FCA’s strategy.
Mackintosh shared that she would have liked to have seen more involvement from the Bank of England and how it will support some of these key principles, asking questions regarding how a collaborative, holistic approach will be achieved.
She was also curious about how the FCA will go about implementing a financial market infrastructure that benefits not just payments firms but all financial institutions. This is something that the FCA and PSR will need a stronger partnership on, she said..
Meanwhile, Craddock highlighted the lack of stablecoin oversight and is a surging digital payment that “risks leaving the station” if the UK does not formalise plans to regulate.
UK policymakers have been drafting legislations regarding a stablecoin bill for the past several years, and Mackintosh agreed with Craddock’s sentiment.
She said on stablecoins: “If we don’t start thinking about how we will allow our ecosystem to leverage stablecoins as a payment instrument, we will miss out on a big part of innovation, growth, and competitiveness.”
Finalising her thoughts on the five-year strategy Mackintosh noted that “innovation comes with risk” and the 2008 financial crisis let regulators know they should understand and identify potential risks beforehand.
“(FCA strategy) has to be regulatory driven. If we want to achieve growth, and rebalance, accept risk and understand and accept in a controlled manner to attract entrepreneurs,” concluded Mackintosh.
