One of the main challenges for innovative start-ups can be regulation. Whenever there is a genuinely new idea, it is often the case that it comes up against a legal obstacle or uncertainty concerning the legal feasibility of the business model.
We’ve seen how start-ups have struggled to transform their business plan into a legal entity. For example, Uber, the popular taxi App, has been sued in many countries where it has sought to operate. Even prior to Uber, Airbnb had encountered similar problems.
Legal barriers can be even more problematic in the financial sector where regulators have become more conservative and protective of the consumer post the 2008 financial crisis.
While I was working for a start-up that wanted to provide loans via P2P to students struggling to pay their tuition fees, I had to deal with numerous regulators in order to establish how to implement the business model. While it’s quite normal in the UK, in countries like France it is even more difficult to implement. The “Autorite des Marches financiers” (the equivalent of the FCA), for example, is very protective and the banking monopoly exceptionally strong.
Now that I work in the UK, I can appreciate the difference. A year ago, the FCA launched the “Innovation Hub” with a view to helping new and established businesses to “introduce innovative financial products and services to the market.” The positive tone is clear from the first line of the home page.
This is revolutionary because the UK is one of the first countries to proactively help businesses build new ideas in order to change the financial landscape, with many countries (Australia, for example) now deciding to follow the same path.
While some countries continue to prevent the flow of new ideas and products from reaching the market place through regulation, the UK has decided to help companies to develop new ideas within the law. The Innovation Hub has bridged the gap between the regulators and businesses, acting as a supporter rather than an obstruction and understanding that we need to be agile and begin to break down the regulatory barriers that can hinder innovation.
While most authorities state that their mission is simply to regulate, the FCA has made it its goal to “promote effective competition in the interests of consumers. Innovations often drive effective competition.” That is precisely why the UK will continue to lead the field in Fintech.
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