Regulators are holding fintech companies back in cost-of-living crisis, industry body says

Regulatory red tape is stopping fintech firms from boosting financial inclusion and helping consumers through the cost of living, the industry body and EY said today.

In a new report, Innovate Finance and Big Four firm EY said today that City regulators must urgently expand Britain’s open banking regime and loosen rules on “robo-advice”, so struggling consumers can access free financial advice on managing debt. .

Open banking was rolled out in the UK in 2017 to free up data sharing between big banks and small fintech firms, but progress has slowed over the past 12 months as it enters a new phase of implementation.

The head of Innovate Finance Janine Hirt said it was important that regulators now pick up the pace of movement to help consumers.

“There is more fintech companies can do to help people – especially with open banking, but this can only be made possible by regulatory changes,” she said By AM “We are at a critical juncture, with consumers facing increasing pressure on their private finances, and it is important that there is a rapid change in regulatory policy.”

The first phase of open banking was deemed substantially completed by the Competition and Markets Authority earlier this year, but progress now depends on a number of recommendations from the Joint Regulatory Oversight Committee (JROC), led by the Ministry of Finance, the CMA, the Payments Systems Regulator and the Norwegian Financial Supervisory Authority.

JROC co-chairs Sheldon Mills of the FCA and Chris Hemsley of the Payment Systems Regulator have previously said that the UK has “led the way on open banking” and that they were “engaging with the industry and wider stakeholders as we work in tandem to deliver our shared vision. “

The new report by EY and Innovate Finance added that debt advice, offered by fintech firms, could help cash-strapped Brits manage their debt more savvyly amid cost-of-living pressures.

EY’s UK head of fintech and the former interim head of the FCA, Chris Woolard, said there was an opportunity for regulators and industry to work more closely together and ensure access to fintech was widened.

“FinTechs are already starting to come up with innovative solutions, using technology and data, to ease these pressures and help households manage their finances better,” he said. “However, awareness of solutions can be low and some lack scale. If authorities, regulators and industry work more closely together, there is an opportunity to create the right market environment for good ideas to succeed.”

The warnings come after the head of the Financial Inclusion Commission warned in October last year that the fintech sector was not yet pulling out all the stops to reach consumers.

“At the Financial Inclusion Commission, we’ve gone through the prominent fintech companies and very few of them suggest that inclusion is one of their goals – either their business goals or their social goals,” he said By AM

An FCA spokesperson said: “Open banking has an ongoing role in promoting greater competition and innovation for the benefit of consumers, businesses and the wider economy. It will help maintain the UK’s international competitiveness and leadership in the field, as well as help improve financial inclusion.

“We will continue to work with industry and others as we seek to fully realize the benefits of open banking.”