Why innovation is vital for the future of the UK’s financial services
Innovation is a buzzword that’s been floating around the business landscape for quite a few years now, but have you heard of disruptive innovation?
A recent statement from the UK’s Financial Conduct Authority (FCA) praised innovations in the country’s financial services sector, but discussed the need for more disruptive innovation to take place over the coming years in order to ensure that the industry is fit to compete on a global scale in the future.
The growing adoption of fintech – financial technology that encourages disruptive innovation – allows innovation to happen quicker and on a wider scale than ever before, but how can finance managers make sure new ideas are remaining compliant with industry regulations and keeping their risk profile to a minimum?
The rise of fintech
Speaking at an FCA event entitled ‘UK Fintech: Regulating for innovation’ in February 2016, Christopher Woolard, the organisation’s director of strategy and competition, outlined how he believes innovation can thrive in a compliant business landscape.
He drew on statistics from the 2015 EY Fintech Adoption Index, which showed that 15.5 per cent of technology users throughout the world’s financial markets have already embraced fintech, with this figure expected to double by the end of 2016.
Mr Woolard commented: “It’s a sobering reminder of the pace at which the digital landscape is evolving and the scale of the challenge for us as a regulator to bear in mind when we think about both the risks that financial innovation may bring and how to balance that against creating unnecessary barriers to the many opportunities.”
As fintech is all about disruptive innovation, where exactly does this fit into the field of financial compliance?
What is disruptive innovation?
Disruptive innovation involves the creation of a new business idea that wipes out an old one, meaning all staff members then have to get their heads around and work in line with this new innovation.
This is, of course, challenging, but it can be a successful way to work, if managed in the right way. And that begins with implementation of the idea or technology – a process that needs to have compliance at its very heart.
Industry regulations still need to be at the centre of banks’ and other financial organisations’ actions to protect their legal standing and keep their risk profile to a minimum, but this doesn’t mean innovative ideas need to be stifled. Instead, they just need to be carefully thought out, and proposed with regulation compliance in mind. This means c-level executives often need to get involved in the process to ensure that everything is running smoothly and in line with the FCA’s requirements.
Why innovation is important to today’s financial recruiters
The main questions underpinning Mr Woolard’s speech were: “How can regulation foster innovation in financial services? And as part of that, how can we ensure that we have a regulatory environment fit for future innovation?”
With the FCA believing that regulation and innovation can go hand-in-hand, as long as new ideas and developments remain compliant with financial legislation, what exactly are today’s financial recruiters looking for in a job candidate?
Hirers need individuals with innovative, creative minds, who are open to change and are easily able to adapt their skills to suit different business models and technological functions. And, of course, recruiters are searching for applicants with sufficient experience and understanding of the latest financial regulations they need to comply with.
This may sound like a lot to ask for, but for individuals looking to work in today’s ever-changing financial services sector, it is often the bare minimum that hirers require.
Innovation and regulation can go hand-in-hand, but only if innovators are trusted enough to develop their ideas in a compliant manner, and CEOs are confident that new innovations won’t increase their organisation’s risk profile.
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