The Financial Conduct Authority (FCA) recognises it is going to have to be more outward looking and progressive if it is to maintain the UK's position as a leader in the global fintech market post-Brexit.

Speaking at the Innovate Finance Global Summit at London's Guildhall this week, Chris Woolard, director of strategy and competition at the FCA said: "Our approach is bold, pre-emptive and progressive and we are committed to continuing to lead change in this area."

Chris Woolard from the FCA on stage at the Innovate Finance Global Summit © 2015 Sean Ebsworth Barnes
Chris Woolard from the FCA on stage at the Innovate Finance Global Summit © 2015 Sean Ebsworth Barnes

Woolard admitted that firms are clearly concerned by the implications Brexit may have on the industry. "In the immediate aftermath of the EU referendum there was a concern that we would see the number of innovative firms fall and the number of those operating with us fall away. Indeed we did see a dip and it is worth reflecting on the fact that we live in an uncertain climate," he said.

However, since the initial post-referendum dip the FCA has actually seen an uptick in interest from firms. "In the nine months prior to the referendum we received 264 requests for support, in the nine months after, that figure has increased to 321," Woolard announced.

The regulator has also seen a growing interest in its regulatory sandbox, receiving 77 applications for the second cohort, of which 31 will progress towards testing, up from 24 in the first cohort. The sandbox is a digital space for firms to test innovative solutions without being at risk of breaching financial regulations.

Although the FCA provides these numbers as evidence that innovation is well and good in the sector, it could also be further evidence of the feeling of uncertainty in the market post-Brexit, as growing numbers of firms seek FCA guidance than they would have had to before.

The FCA's Project Innovate was set up in October 2014 to "help firms tackle regulatory barriers to innovation, be it through clarifying regulatory expectations, examining our own rules or enacting policy changes," according to Woolard.

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Since then it has helped the above number of firms to overcome regulatory hurdles to bring financial services and products to market, as well as enact policy changes like the upcoming open banking regulations.

The future of Project Innovate

Looking forward, the watchdog wants to extend its reach beyond London to the rest of the UK, and internationally. Although London is still recognised as a leading hub for fintech companies, according to Deloitte, other cities will be looking to capitalise on a weakened capital post-Brexit. Major financial firms like HSBC and UBS have recently warned that they will have to shift staff away from London in the aftermath of Brexit.

Earlier in the day Maria Gotsch, CEO of the partnership fund for New York City - replying to the UK's special envoy for fintech Eileen Burbidge - said that New York is "not willing to concede the fintech capital to London".

Burbidge had earlier reiterated the belief that "we really do reflect a financial capital of the world and laid over across what is happening with digital, we have a fintech capital of the world", she said. "I think the really crucial piece that cements London's position and the UK therefore as one of the leading hubs in the world is that we have really progressive regulators and policy makers".

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The FCA has identified two areas of potential growth: the Edinburgh-Glasgow corridor and the Leeds-Manchester area. "We are especially interested in areas where we see both fin and tech colliding, so areas with a strong financial centre already and a technology presence often backed by a strong relationship with local universities," Woolard said.

"Our aim is to encourage the emergence of more innovative firms and will start next month to offer a regular presence, guidance and informal steers to those seeking to innovate [there]," he added.

Internationally, Woolard says that in the past few months alone the FCA has signed cooperation agreements with regulators in China, Japan, Canada and Hong Kong, and is in discussions with India.

"This transfer of ideas and innovation breaks down barriers to entry, gives firms more flexibility to innovate and increases the possibility of international collaboration, which we believe is in the interest of consumers and the wider economy," he said.

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Woolard also warned against creating a "Wild West" situation "where different jurisdictions set up their own sandboxes with different standards" though. "This runs counter to our ambitions that we know many international parters share: for responsible innovation."

"We believe a sandbox that fails to prepare firms to join regulated markets will not help firms succeed in the long term. We see potential risks for the reputation and trust in financial innovation if there are examples in the future for global failure."

The solution for Woolard is to create a "common understanding of the principles of good innovation [so that] we can benefit from stronger international collaboration and secure the long term future of the industry."

The FCA is also looking to expand the remit of its automated advice unit to help companies working within mortgage, insurance and debt sectors, as well as firms that want to provide guidance instead of regulated advice.

Finally, the regulator wants to do more around the impact emerging technologies could have on firms. This includes an open debate paper on the risks and benefits of distributed ledger technology.