Your IndustryOct 8 2015

Don’t let US tech yank away our business

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Don’t let US tech yank away our business

Technological innovation by financial services in the UK still lags behind other industries, but perhaps the biggest challenge is from social media and technology companies based in the US.

We are already starting to see the introduction of new products and services from the US that have the potential to disintermediate UK financial services companies from their customers. There is therefore a pressing need for us to set the pace on the digitisation of the UK market if we are to see off this challenge.

The FCA recognises this and in 2014 launched Project Innovate in an attempt to ensure that the regulatory regime supports the development of innovative products and services that can benefit the consumer. Regulation is often seen as a hindrance to innovation and the FCA’s recent call for input on the barriers that regulation poses to innovation in digital and mobile solutions sought to explore this.

It is a topic Tisa’s Technology Innovation policy council is focused on as we work with The Savings & Investments Policy project team to develop a Digital Passport.

The European Commission also sees the creation of a digital single market as a priority and has introduced a strategy to make the EU’s single market fit for the digital age.

The EC claims that tearing down the regulatory walls and moving from 28 national markets to a single one could contribute €415bn (£306bn) a year to the economy and create hundreds of thousands of new jobs.

The EC claims that tearing down the regulatory walls and moving from 28 national markets to a single one could contribute £306bn a year to the economy

Whether we look solely at the UK or consider the wider EU implications, there is a similarity with the barriers that have to be overcome if we are to build a data-driven economy which functions properly, or which can reach its full potential.

So what are the barriers? Some are technical, some are administrative or legal. It could be as simple as slow internet connections in parts of the UK and as we travel around Europe. Technical disparities can prevent networks and devices from linking smoothly together because they cannot be properly connected, or because of a difference in the standards being used. Copyright and consumer law can also vary between member states.

The EU Digital Single Market strategy sets out to address immediate issues, as well as looking to the future. Andrus Ansip, the EU Digital Commissioner, sees it as rather like building a house – you do it from the bottom up. As a start, decisions to end roaming charges are being finalised so that from June 2017 when we travel in the EU mobile phone users will pay the same price as they would at home with no additional charges.

If you ask the EU Commissioner to express views about the digital future of Europe or indeed, of the whole world, he would do it with one word – data. The digital economy revolves around data. It is the driving force behind the three main elements of productivity, innovation and digitalisation.

There are many aspects of data to be considered, not just data protection, where the EC is moving forward with reforming EU rules.

Ownership and management of data flows, use and re-use of data, together with data storage, all underpin important emerging sectors such as cloud computing, the Internet of Things and big data.

Online platforms are pivotal in this regard. With more than 1trn web pages on the internet, and more appearing every day, platforms are an important way of bringing people and online information together, generating, accumulating and controlling an enormous amount of data.

Their influence shapes much of our online behaviour and it would be hard to imagine life without them. Platforms certainly contribute a great deal to Europe’s society and economy. They have innovated considerably, transforming whole sectors and challenging traditional business models.

But there are concerns from many quarters about their control of data, market strength and bargaining power, as well as various aspects related to access.

We need to be prepared for the fact that UK financial services platforms are likely to be included within the EU remit, so Tisa’s Technology Innovation council is going to concentrate on data as one of its key policy themes.

The EC is now gathering evidence on the issues in order to know and understand clearly whether there really are problems, and if so, how to deal with them. The strategy will also look into factors such as access, openness and how to ensure that platforms are instruments of opportunity.

So while it is important to continue to work with the FCA to overcome the regulatory barriers to innovation in the UK financial services market, we must also get involved in the EU review.

An extensive consultation with all parties involved is being implemented by the EC from September to spring next year.

Tisa is going to collaborate with other UK FinTech partners, FCA and government bodies to help represent the position of UK consumers and financial services platform operators. We will also consider if new measures are needed and what impact they might have on incentives to innovate and deliver new services.

After all, that is the whole point of the digital market strategy, to make sure that we make the most of the great potential that the online age offers us.

David Dalton-Brown is director general of Tisa