In this article we’re going to first succinctly explain what precisely Project Innovate is, the elements it contains, and how it aims to help finance start-ups as well as established finance companies. We’re then going to briefly outline some of the developments that Project Innovate has in the pipeline and finish off with a summative conclusion.
What Is Project Innovate & How Can It Help Fintech Start-up’s?
Project Innovate is primarily an innovation hub which was set up by the FCA in May 2013. According to the FCA, its overall goal is to promote “effective competition in regulated financial services in the interests of the consumers”. And it sees “disruptive innovation” executed primarily by finance start-ups, as a “key part of effective competition”.
The project aims to engage with, support and advise these finance start-ups so they can compete effectively and have a better chance of bringing new and innovative financial products, services and business models to market to benefit the consumer, but in a way that works within the regulatory framework. In some cases, some regulation can potentially be adjusted, within reason, to accommodate these new products, services and business models. The project consists of a number of elements which are discussed in a lot more detail below.
Firstly, the project provides a platform for a real two-way dialogue between the FCA and finance start-ups as well as established finance companies to help them, in the FCA’s words, “understand the regulatory framework and how it applies to them”, making them acutely aware of the “regulatory implications of their concepts, plans, and choices”. The FCA supports the companies not just through intimate meetings but also through roundtables, workshops and presentations.
Secondly, and more interestingly, under Project Innovate the FCA also seeks to uncover areas where they can possibly adapt the regulatory framework to help the finance start-ups bring new, innovative and often radically different financial services and products to market for the benefit of the consumer. Crucially, the FCA seeks to add this “flexibility” and remove “barriers to entry” where possible in a way that does not at all erode “consumer protection or the integrity of the financial system”.
Thirdly, under Project Innovate the FCA provides finance start-ups with assistance in preparing and making an application for authorisation. This would otherwise be a more time consuming, complex and often quite expensive process for young finance start-ups. Thus the FCA helping in this way results in a higher proportion of the finance start-ups that should be applying for authorisation to apply for it.
Project Innovate also has a number of other developments in the pipeline. Most notable is the regulatory sandbox, which as explained in FCA’s November 2015 proposal, seeks to provide a “safe place” where finance start-ups can try out new services, products and business models without immediately sustaining all the regular regulatory consequences of taking part in these activities.
Other important developments include Project Innovate taking a more global view by helping UK finance start-ups take their products/services to international markets but also help non-UK business people who want to operate a finance start-up from the UK or want to enter the UK market. Further information on Project Innovates upcoming developments can be found here.
So, as can be clearly seen from the above, Project Innovate helps finance start-ups tremendously by providing valuable advice and guidance, by removing barriers to entry through adapting the regulatory framework where possible and by aiding in the actual completion of the authorisation application.
All of this support would be expensive and difficult for a finance start-up to obtain if Project Innovate did not exist and some elements such as the potential adapting of regulatory framework were not possible before Project Innovate. Thus, taken collectively, Project Innovate does a great many things to level the playing field between large incumbent financial organisations and small financial start-ups in order to help the start-ups bring new, often radically different products, services and business models to market for the benefit of consumers.