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The UK’s Financial Conduct Authority (FCA) has launched a new five-year strategy that aims to improve trust in the financial services sector, while also moving the dial on risk.
“Predictable, purposeful and proportionate” is the new FCA motto as it launches its new five-year strategy for regulatory oversight.
The new strategy includes commitments on topics such as emerging technology, financial crime and, inevitably, its integration of the Payment Systems Regulator’s (PSR) work on issues such as open banking and open finance.
“Our last strategy set high standards and bolstered our operational effectiveness. We are committed to going much further, delivering at pace to meet the scale of change we are facing over the next five years,” said Nikhil Rathi, CEO of the FCA.
“This strategy sets out our priorities, how we’ll become more efficient and effective and make the choices that shape the financial system.”
The strategy announcement comes at the same time as an update from the FCA on changes related to the Consumer Duty.
The changes include simplifying mortgage and lending expectations, streamlining savings account communications and reviewing credit advertising rules.
As part of efforts to reduce regulatory burdens post-Consumer Duty, it will retire more than 100 pages of outdated guidance, withdraw hundreds of supervisory publications and give firms more flexibility in disclosures.
Digitisation
The FCA has acknowledged that technologies such as artificial intelligence (AI) will play an important role over the next five decades, noting: “We are experiencing dramatic technological change."
According to the regulator, financial markets can support businesses and consumers to make the most of technological progress, “while managing its risks”.
The FCA has said that firms need to embrace this advance and make sure that they adapt to digitisation.
“By harnessing technological advances, for example, firms can improve their competitiveness, attract new customers, serve existing ones more effectively and ensure our markets — particularly the wholesale markets in which we excel — function better.”
This comes at the same time as a clear push for growth from the regulator.
Open banking and open finance
A key focus included in the FCA’s roster of commitments is the development of seamless account-to-account payments, giving consumers more options in how they pay.
The regulator has also committed to making variable recurring payments (VRPs) a reality in the UK, as it believes they will be important in “giving people more control over their payments and lower processing fees for businesses”.
To support long-term growth, meanwhile, the FCA is calling for open banking to be placed on a commercially sustainable footing while maintaining the current free-to-access model.
For example, it has suggested that premium services could be introduced to fund investment in improved banking and payment services tailored to consumer needs, and has pledged to work with industry stakeholders across the ecosystem to achieve this.
Beyond open banking, the FCA is positioning itself as a leader in open finance, advocating for greater data sharing across financial services.
The regulator believes that expanding access to financial data will allow consumers and businesses to benefit from greater choice and personalised support.
It has suggested that small businesses, in particular, could see reduced borrowing costs, as improved data access could help the 20 percent of SMEs that currently struggle to obtain credit at reasonable rates.
To push this forward, the FCA has committed to publishing a roadmap for open finance within the next year, with regulatory foundations for the first scheme expected by 2027.
Within this, the FCA has prioritised small business lending.
Financial crime
Financial crime is another key factor in the FCA’s strategy, and it is obvious that the regulator sees it as an issue that must be addressed collaboratively.
“We will work with those firms that we know want to play their part in tackling crime,” the regulator says in the document.
Further, it has said that it will “draw on all tools” to get the best outcome, including enforcement action.
Acknowledging that criminals operate across borders and regulatory boundaries, the regulator will deepen its cooperation with domestic and international law enforcement agencies to share intelligence and coordinate action.
In addition, recognising that even the most robust systems cannot prevent every scam, the FCA is focusing on consumer protection.
It aims to enhance public awareness of investment fraud and authorised push payment (APP) fraud by issuing more scam alerts and developing new ways to deliver warnings to consumers.
Ultimately, by 2030, the FCA expects to measure its success through improvements in market cleanliness and reductions in suspicious trading activity, slower growth in investment fraud victims and financial losses, and a decline in the rate of APP fraud cases and losses.
