It was revealed in a Money Marketing article this week that the FCA has so far spent £1.8m on its Project Innovate – the initiative designed to encourage innovation and new approaches in financial services.The figure was disclosed following a Freedom of Information Act request, which showed that the project has cost £1,853,840 since its launch in October 2014.
With projected costs of £1m a year, this means the project has come in under budget so far.
What is Project Innovate?
The programme aims to identify opportunities for innovation and so-called ‘fintech’ – financial technology – in the UK financial services sector.
There are a number of strands to the project, including:
- An innovation hub, where firms can propose new ideas for financial products or services. The Financial Conduct Authority plans to help companies bring new ideas to market by providing support around the regulatory requirements this entails. The regulator’s Annual Report, released in July, announced that the hub helped 230 firms during the past year.
- A new Advice Unit for firms investing in automation. The unit will provide regulatory feedback to firms developing automated models to deliver lower cost advice to consumers.
- A ‘regulatory sandbox’ where firms are encouraged to trial new delivery methods, solutions and services under test conditions which may include less stringent regulatory ‘red tape’.
The regulator has also run events, including this one on the topical issue of robo-advice. And in August, it confirmed that it was investigating the potential of blockchain technology and the virtual currency Bitcoin under the ‘Project Innovate’ umbrella.
Commitment to innovation
A commitment to developing new approaches has been a consistent theme of the FCA’s messaging in recent months. Its 2016-17 Business Plan reiterated this, singling out ‘innovation and technology’ as one of its priorities.
And in a speech to the banking sector in September, Director of Strategy and Competition Christopher Woolard confirmed that innovation and ‘RegTech’ – regulatory technology – remained high on the Authority’s radar.
Breaking down the costs
The FOIA requested by Money Marketing broke down the overall costs of Project Innovate into £1.66m on staff and £184,439 on operational costs.
£119,660 of the operational costs went on external consultancy and communications fees, £31,794 on events and staff training, £21,585 on travel, and £11,399 on catering, printing and publication subscriptions.
Travel costs relate to the regulator signing ‘co-operation agreements’ with overseas regulators to support promoting the UK as a centre for new approaches in this sector. This fits with the FCA’s aspiration to become more active overseas, as we reported in a blog last month.
What does increased innovation mean for financial services firms?
The regulator’s support for new approaches is a positive step – particularly for established financial firms, which may be less agile and need more regulatory support to deliver new business models.
The growth in so-called ‘disruptive’ solutions – often delivered by start-up firms less burdened by historic systems or approaches – is a potential threat to the more established financial services sector. By making it easier for all firms to explore new solutions, the regulator is encouraging a compliant approach to innovation that incumbent firms can get behind.
Whether you want to explore dramatically new ways of delivering financial services, or take a more cautious approach, it’s clear that the banking sector is not standing still.
Make the most of the innovations at your disposal and you will be well-placed to take on the competition, whether it comes from established businesses or new entrants to the market. Operations, customer communications and sales can all benefit – the key lies in ensuring firms don’t forget about regulatory compliance requirements in their haste to innovate.
Our Financial Promotions Checklist will give you a good grounding, so you can be sure your promotions are ticking the box, whether delivered by innovative or more traditional means. The checklist is free, and you can download a copy here.