UK regulation of fintech “intrusive” warns KPMG
THE UK’s regulation of the fintech sector is in danger of becoming “intrusive”, according to a new report.
Big four accountancy firm KPMG said that regulators and supervisors worldwide are beginning to respond to fintech developments.
The report entitled, “The future shape of UK FS regulation: Rule taker or rule maker?”, said regulators are introducing new requirements to cover a different and wider range of firms.
“Striking a balance between encouraging innovation and mitigating the risks is already proving difficult,” said KPMG.
“In the UK, there are already some signs of a relatively intrusive approach to the regulation and supervision of fintech-driven products and services.”
According to KPMG, fintech developments provide an opportunity to redraw some lines around the extent to which consumers should be expected to take responsibility for their decisions and actions.
It said fintech will allow consumer information and risk warnings to be delivered in new and imaginative ways.
In an earlier report KPMG warned that although the initial regulatory response to fintech developments was supportive it was now tightening up.
“The emphasis was on encouraging innovation; using regulatory sandboxes, accelerators and innovation hubs; and taking a ‘technology neutral’ approach,” said KPMG.
“However, we are now clearly entering a much trickier phase for regulators, who have to identify, assess and respond to the risks (not just the benefits and opportunities) posed by fintech developments to regulated firms, to financial stability, and to consumers.”
KPMG’s report also said that post-Brexit UK financial services regulation may alter, but it won’t ease.
UK regulators have been explicit that they will not deviate from European Union (EU) regulatory standards, but the UK’s departure from the EU leaves considerable scope for divergence.
And the initial task of rewriting EU rules into UK legislation will lead to a host of tweaks and edits.
However, the long history of “super-equivalence” between the UK and EU is unlikely to change, meaning UK financial regulations will only get stricter in future.
“I see no sign that the UK regulators’ tendency to lead the debate on risk and conduct issues will abate so regulation may become more demanding, not less,” said Julie Patterson, Regulatory Insight Centre, KPMG UK.
Read more: New fintech hub opens in Belfast