Zopa chief reveals plans to disrupt banks

Zopa chief reveals plans to disrupt banks

“I think consumers are responding to the disruption of all sorts of industries and disruption occurs when better value is offered by a disruptive player than the incumbents,” says Giles Andrews, chief executive of Zopa.

In the latest FTAdviser video interview, Mr Andrews said financial services has been rather slower to be disrupted than many of the industries we know well, such as music and travel.

He told Investment Adviser’s Julia Faurschou that this has been because financial services has historically been “quite well protected by regulation.”

Mr Andrews said: “Regulation of the incumbent sector has made it quite hard to disrupt.

“I think two things have happened. One, with the financial crisis, consumers became more disenchanted with banks and actually the bank’s jobs of providing value to consumers became harder in light of the financial crisis, with higher capital requirements plus legacy issues such as their technology and their performance in the crisis which took a bit of hammering.

“Those issues have really switched consumers on to look for alternatives and then we have a regulator in the UK who is interested in competition.”

Secondly, wth the setting up of the FCA, Mr Andrews said competition became a clear mandate.

He said: “The regulator doesn’t seek - don’t get me wrong - to disrupt financial services but (the regulator does) at least provide an environment where there can be a much more level playing field.”

His comments came as the FCA announced it intends to open a sandbox unit to help firms test potential robo-advice offerings and “innovative products” in spring 2016.

According to the watchdog their new sandbox unit will allow businesses to test out new, innovative financial products, services or business models without incurring all the normal regulatory consequences of engaging in those activities.

The launch of the unit comes after the regulator came under fire from Harriet Baldwin, the economic secretary to the Treasury, for making innovation difficult back in September.

Ms Baldwin said a start-up that wanted to enter the automated advice space was told it would have to ask consumers 247 questions to comply with regulation.

She said a ‘sandbox’ for innovation in this space was required that could be a “safer space” for firms to experiment with ideas for consumers without the full burden of regulation.

Under the plans published today (10 November) in a 26-page paper, firms that do not yet have FCA authorisation will be able to make use of the sandbox.

The FCA has suggested that these firms will be able to use a tailored authorisation process that will allow only for the testing of products and services.

For authorised firms, the FCA is proposing to use tools such as a virtual test or live testing with certain waivers that it argues can give firms confidence that enforcement action will not be taken at a later date in relation to attempts to bring something innovative to market.