Over the course of seven days this month, London’s FinTech community came together to discuss industry initiatives, regulation and disruptive technology at the third London FinTech Week conference.
The conference organisers say the event was designed to “enhance the dialog between established multi-nationals, innovation firms, disruptive start-ups, governments, media and investors.”
With a multitude of speakers from all sorts of FinTech industry backgrounds, a dialogue was indeed established…
The central issue of the week was without doubt the disruptive technology known as blockchain – which had an entire day of workshops, panels and discussions dedicated to it.
During one particular panel session, FinTech leaders agreed that smart contracts used in conjunction with blockchain technology could be the key to making major efficiency savings.
Sean Murphy, partner at Norton Rose Fulbright LLP, told delegates that long-term contracts are typically inefficient adding it’s impossible to anticipate what will happen with contracts in the long-term.
“You have to deal with circumstances and legal ramifications. Contracts are often amended,” Murphy said.
Despite being hailed as a revolutionary technology for the financial world, speakers at London FinTech Week raised several issues with its implementation for settlement transactions.
Simon Taylor, panellist and former blockchain R&D vice president explained that despite blockchain’s origins lying in settlement, it should employed elsewhere.
“People look at blockchain technology and assume that because bitcoin did settlement, blockchain should be used for settlement when settlement is one of the hardest things to solve using blockchain,” Taylor said.
Overall, custodians have welcomed blockchain technology with its potential to streamline processes like settlement, clearing and corporate actions.
A recent report published by JP Morgan and Oliver Wyman suggested that buy-siders must embrace blockchain technology or face falling behind with developments.
It’s not just industry participants who have looking into blockchain and been left scratching their heads.
Regulators in the US have warned blockchain technology could pose “risks and uncertainties” to the financial stability of capital markets.
FinTech and RegTech
The Financial Conduct Authority’s (FCA) director of strategy and competition, Christopher Woolard, made an appearance at London FinTech Week.
Before beginning his speech on innovation and competition in the FinTech industry, he addressed the “elephant in the room” – Brexit.
Woolard confirmed that European regulation still applies to financial services firms in the UK, despite the EU referendum result in June.
“As far as the FCA and UK government are concerned, firms are still expected to comply with regulations despite Brexit, and we expect firms to continue bringing forward plans to implement EU law,” Woolard said.
He explained to delegates that despite the EU referendum, the FCA’s role remains unchanged as it works through the issues presented by the result last month.
In terms of FinTech, Woolard explained the FCA continues to strive to be perceived by the industry as being fully engaged with the FinTech community.
The FCA will encourage innovative ideas by supporting start-ups through initiatives like the regulatory sandbox and ‘Project Innovate’.
‘Project Innovate’ – launched in October 2014 – was established to help FinTech firms bring new products into the market. Woolard added that thus far, 177 firms have benefited from the project.
The UK regulator recently published suggestions from FinTech firms on how the FCA could improve its operations.
Making reporting requirements easier came out on top, followed by driving the use of technology to improve overall compliance.
Woolard also reminded delegates of the FCA’s FinTech partnerships with Australia and Singapore, which aim to improve the process of bringing new products to global markets.
Woolard concluded: “We have to do whatever we can to ensure we can establish UK FinTech firms globally, and those partnerships allow data to be shared back and forth, whilst reducing the overall time to market for new FinTech products.”
On a separate panel, Stuart Davis, managing associate of Financial Regulation Group at Linklaters, praised the work of regulators for their contribution to the FinTech industry.
Particularly for blockchain, Davis said regulation will be necessary for its progression in future.
“With new initiatives such as Project Innovate and the regulatory sandbox, its clear that the FCA is dedicated to creating safe new technology that will help the financial services sector,” Davis said.
He also complimented the FCA on initiatives like the regulatory sandbox - a safe space in the regulatory sphere where FinTech companies can test their products for free.
During his speech at London FinTech week, Christopher Woolard added that the regulatory sandbox was the first to be launched in the world.
He encouraged FinTech start-ups by explaining the regulator will collaborate with firms through the sandbox, to bring innovative products to market quicker, and allow a safe environment for regulatory testing.
Gary Chu, lead lawyer for UBS’ FinTech Innovation Lab, and speaker at London FinTech Week, told delegates banks must work together on blockchain based platforms to realise their potential.
He said: “If we are working on a platform for the issuance and trading of bonds, and Morgan Stanley has a different panel for trading securities, we must develop a common platform to generate certainty in the market.”
Collaboration was indeed a theme at this year’s event – speakers, panellists and even delegates encouraging one another and even shaking hands to ensure future investments and implementations.
There can be no doubt that blockchain and regulation will continue to be key themes at next year’s conference, but the London FinTech community can rest assured that despite Brexit, London remains a global financial technology hub.