FCA suggests P2P could challenge centuries-old banking model
Peer-to-peer lending, alongside blockchain, cryptocurrency, smartphones, autonomous smart vehicles, tech giants and the birth of the internet could challenge the legacy banking model, a Financial Conduct Authority (FCA) executive has said.
Speaking at City Week 2023, Emily Shepperd, chief operating officer and executive director of authorisations at the FCA, asked: “At what point did you realise that blockchain, cryptocurrency, peer-to-peer platforms, smartphones, autonomous smart vehicles, tech giants and the birth of the internet might challenge your centuries-old banking model?
“That is the question many executives of legacy institutions are reflecting on.”
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Shepperd went on to praise the innovation of fintech companies in the UK, adding that the regulator can help fintech companies to innovate by “setting firm foundations on which they can grow”.
“It is not long before today’s start-up challenger becomes tomorrow’s legacy firm,” she said.
“There is no need to reinvent the bank or to thrash about looking for radical new inventions. What there is a need for is to address what customers want even if it is outside a current business capability.”
Shepperd acknowledged that many fintechs feel frustrated and stymied by regulation, but defended the FCA’s decisions by saying that one of the best things that a regulator can do to help innovators is to set firm foundations in place on which young business can grow.
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“As fintech firms grow, they often find themselves moving towards more regulatory scrutiny and eventually, for example, applying for banking licence,” she added.
“It is nothing to fear. The sooner you can get a handle on your regulatory issues, the sooner and faster you can grow.
“The authorisations gateway is where we protect our market integrity and where in the last year we have turned away more firms than ever.
“Why? Because they did not meet the standards that the thousands of domestic and global firms – including fintechs – who are authorised to operate in the UK have strived to attain.”
Ahead of the introduction of the new consumer duty, Sheppard emphasised the FCA’s aim to root out the source of likely harm and to maintain high standards so that “innovators can innovate and investors can invest – with confidence.”
The implementation deadline for the new consumer duty is 31 July 2023. By 30 April, all regulated firms should have completed all the reviews necessary to meet the outcome rules for their existing open products and services.
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