Breaking Down the Roadmap: Financial Regulation
Written By: Ian Davey – 2 min read
The recently published FinTech Scotland Research & Innovation Roadmap has set out the foundations for the FinTech industry to capitalise on the growth potential of the sector, and to fulfill its potential in changing the financial services industry, which already contributes £132 billion to the UK economy.
Research & innovation will play a fundamental role in reshaping the future of finance, and the Roadmap will provide the foundations for Scottish FinTech to embrace its potential and support the growth of the wider economy – the overarching aims are the creation of over 20,000 new FinTech related jobs and an increase in economic value (GVA) from £598 million to more than £2 billion, over the next 10 years.
The Roadmap outlines 4 key themes, which were prioritised by FinTech companies, financial institutions and regulators; open finance data, climate finance, payments & transactions and financial regulation.
In our ‘Breaking down the Roadmap’ blog series we will be looking at the strategy in smaller segments over the next few months, providing a summary and comments on key areas.
We are going to kick off with a financial regulation – providing a summary of this pillar and then a series of follow up articles looking at specific areas of this theme in more detail.
As outlined in the Roadmap, “Financial regulation… provides the foundations needed to enable a stable and safe industry. It ensures an industry that serves the interests of consumers and investors, and ensure safe open markets”
Regulation can play a key role in enabling FinTech and innovation, but it is also challenging and complex. Operating in financial services means you need to address a large volume of regulation and keep up with its pace of change, and robust solutions are needed to manage compliance and risk. This can be very expensive and difficult to achieve – across the UK it is estimated that the cost of demonstrating compliance is as much as £6.6 billion.
Considering these challenges, it is key that financial regulation becomes an enabler of FinTech growth, not a barrier, particularly for new entrants to the market and the Roadmap provides a framework to ensure this through the application of technology and data driven innovation.
As with other key pillars in the report, a series of actionable research & innovation calls have been set out, each delivered through collaboration with a wide range of partners – these will be actioned in 3 phases over the next 10 years.
Three priorities for financial regulation have been identified:.
1. Simplifying compliance
2. Future risk management and risk modeling
3. Future regulation design
So, what are the next steps for financial regulation?
The Role of Technology
And what about the role of technology and data in financial regulation?
Some technologies identified as fundamental to the delivery of the Roadmap include artificial intelligence, machine learning, blockchain, distributed ledgers, open application programme interfaces, robotic process automation, augmented reality, cloud computing and 5G.
Some questions we would like to see addressed in the coming months around technology and financial regulation will include:
-What role RegTech can play in addressing the cost and complexity of regulation?
-How RegTech can support compliance and risk management?
-What is the role of the regulators in supporting Reg Tech?
-What is the future of RegTech innovation?
The Importance of People
The delivery and further development of this pillar and the wider Roadmap will be strongly dependent on stakeholder engagement – meaningful discussions, industry forums, and ongoing collaboration should be a fundamental component of this.
An industry led knowledge exchange programme is set up in phase 1, enabling a sharing of RegTech knowledge and industry led demand.People are the driving force of the cluster, and as outlined in the Roadmap, stakeholders include entrepreneurs, established financial services firms, large global enterprises, academic leaders, enterprise agencies, government, regulators, citizens, community groups, investors and professional advisors.Early orgainsations declaring their support for the delivery of the financial regulation pillar included Autorek, Aveni, Clearwater Analytics and The University of Strathclyde, the latter of which has set up the recently established Centre for Financial Regulation and Innovation.
Do you want to have your say and help shape the future of financial regulation in Scotland?
Fintech-Tables are delivering the FinTech Research & Innovation Roadmap Event Series 2022-23, supported by FinTech Scotland and lead partner Pinsent Masons.
The launch event on September 29th this year, will see a panel of experts discuss “Addressing compliance and supporting risk management through technology and data” followed by an audience Q&A and networking with peers.
Tickets are free of charge to anyone working in the Scottish fintech and financial services ecosystem, please email firstname.lastname@example.org to be sent an ACCESS CODE