May 20, 2021

When I was leading the OCC’s initiative on responsible innovation, I took inspiration from the UK Financial Conduct Authority (FCA).  The FCA’s website demonstrated that the agency was willing to move forward to understand and encourage beneficial financial innovation even in the face of uncertainty.  That gave me confidence the OCC could issue a white paper with more questions and answers about the agency’s plans for supporting responsible innovation. The OCC needed to test its ideas and gather more input from stakeholders – and that was okay. Now six years later, I have a much greater appreciation for the FCA’s groundbreaking approach to regulating innovative firms, products and delivery systems and incorporating innovative technology into its own regulatory and supervisory work.

When the Alliance for Innovative Regulation (AIR) asked me to write a case study about the FCA’s innovation journey, I jumped at the chance.  I was to spend two weeks with the FCA’s newly formed Innovation Division (with over 100 employees), conducting interviews and attending meetings – to see for myself how the FCA grappled with issues of new financial technology.  I never boarded my flight to London on Friday the 13th last March after the WHO declared a global pandemic.  But I conducted over 30 interviews remotely and wrote the paper nonetheless:

This past year has shown us the critical importance of technology: from enabling the most rapid development of a life-saving vaccine in history, to allowing governments and commerce to function, families to stay connected, teachers to educate, and consumers to access financial services.  Because of the dangers of the physical world during the pandemic and the ability of technology to deliver results, the rate of tech adoption in 2020 was greatly accelerated. 

Technology is neither inherently good nor bad.  It will continue to evolve exponentially.  That is why, at least in the financial services realm, we need regulators to set guardrails around the uses of technology to ensure that consumers and the financial system are protected from undue risks and harm; that innovation is not squelched but encouraged and channeled for good and aimed at solving entrenched problems of access and affordability.  The FCA is working to do just that. 

The case study tells the story of how the FCA, an agency just recently established in 2013 in the wake of the financial crisis, became perhaps the world’s most innovative financial agency.  As a former regulator, I found the FCA’s story compelling.  I hope you do too.