EXCLUSIVE: GFIN ‘breathing new life’ into financial sector

Written by Oliver Wade
17/08/2018

The Financial Conduct Authority (FCA) has recently announced that, in collaboration with 11 other regulators and related organisations, it has created the Global Financial Innovation Network (GFIN), in order to build on the FCA’s proposal to create a ‘global sandbox’.

Many experts within the financial services sector are praising the creation of the global network, with Altus Consulting consultant Jonathan Warren labelling it as an innovation that “can only be positive”. Warren continues, stating that we “increasingly live in a borderless world, where consumers will demand their financial services passport seamlessly around the world as they travel”, suggesting that the creation of the GFIN will allow consumers financial transparency among those jurisdictions involved in the network.

“More collaboration, understanding and synergy across regimes can only provide a platform in pursuit of that aim and allow FinTechs to target scale beyond their domestic market,” Warren adds.

“The Financial Conduct Authority (FCA) sandbox provides wide stakeholder benefit. It offers an environment to innovate under reduced regulatory scrutiny while the regulator gains an understanding of emerging technology and its implication for the regulatory regime, to proactively protect consumers. Record numbers in the fourth sandbox show it is gaining traction.”

Warren concludes that the best outcome of the GFIN, is that it offers insight into how the “regulatory burden” across the entire industry could create a wider sandbox effect, allowing it to harness a “culture of innovations” to drive growth and engage consumers.

This perspective is shared by Sopra Steria managing director of financial services Craig Wilson, who says that the ‘global sandbox’ is a “sign of things to come”, with faster change impacting a new range of areas.

“With the GFIN announcement, the FCA is stepping decisively outside of an old ‘sandbox’ – that of the conventional, inwardly-focussed nanny regulator. This old way of working doesn’t reflect the reality of modern international finance, nor is it the best way to combat modern financial crime or money laundering. It’s a safe bet that other markets are set to follow the FCA’s lead,” he says.

Wilson further comments that this is a change he would like to see more firms responding to, and urges them to review their own models and regulatory systems to see how they can be pushed out of their own comfort zones.

“Firms can’t afford to be ‘boxed out’ of the new normal,” Wilson concludes.

The innovation has further been welcomed by Homeycomb Forensic Accounting managing director Jeffrey Davidson, who notes that the collaboration is an opportunity to “breathe new life into the financial sector”.

Davidson highlights: “The so-called “global sandbox” is certainly timely: current financial innovation—driven by the likes of big data, artificial intelligence, and blockchain technology—is animated not by domestic agendas, but by global forces. What is more, the Global Financial Innovation Network is, at least in theory, a clever platform for bringing firms into dialogue with regulators. This is, at present, especially tricky for new firms looking to introduce ideas in various countries with each having its own respected system of financial regulation.

“Hopefully, the Global Financial Innovation Network will speed-up the time it takes to introduce innovative ideas to new markets. In turn, this accelerated rate of change, especially within emerging markets, could cause some healthy disruption.”

Davidson is particularly “excited” by the prospective environment for firms to trail cross-border solutions and share their experiences in an open discussion forum.

However, he concludes that the success of the GFIN will reside in how many regulators and firms agree to participate, emphasising that in order for the scheme to have the type of “real-world impact” on the financial sector that it promises on paper, a rigorous hive mind of experience and intelligence needs to be established.

KPMG UK digital and innovation senior manager Christopher Higgins states that creation of the GFIN is “further proof” of fintech’s increasing maturity, with many regulators collaborating in a “proactive and positive way”.

Higgins adds: “The GFIN and Global Sandbox initiative should help fintech firms access markets internationally - vital for an industry serving global financial services firms that need borderless solutions.

“From a UK perspective, GFIN and the Global Sandbox represent a win-win. British fintech’s international expansion potential will be bolstered, while UK-based fintech users will potentially have greater choice.”

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