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Partner Craig Rogers considers the current digital financial services landscape.
What are the key new developments impacting digital financial services?
We are at an interesting point in the development of financial services. Particularly with the introduction of disruptive technologies such as blockchain, distributed ledger, contactless payments and forms of new lending and raising capital, such as crowdfunding and peer to peer lending. New digital platforms give customers the ability to interact with their banks in a completely different way.
There is a lot of discussion about robo-advice and its impact on the market, for both consumers and the commercial market.
At the same time, we are seeing a lot of impact on the traditional banking models from FinTech and the growth of challenger banks.
How do these developments fit into the regulatory environment?
We have to consider these developments in the increasingly regulated environment we operate in, in the UK, Europe and across the world. The challenge is to satisfy regulatory requirements whilst remaining agile.
Regulators in some areas are struggling to keep up with the growth and speed of change. Here in the UK, the FCA has been extremely effective in staying ahead of developments. For example, the new Regulatory Sandbox allows financial institutions to develop tools, platforms and methodologies without leaving their clients and customers exposed.
At the same time, the FCA has published useful guidance around cloud services and the way this interacts with systems and controls requirements of the FCA Handbook.
We are seeing more guidance around the use of social media for customer communications and digital technologies for financial promotions.
At the same time, the FCA is trying to understand the impacts of things like robo-advice. They appreciate the benefits of providing financial advice at a lower cost but at the same time satisfying the requirements and ensuring customers appreciate the risks of buying financial products.
We are also seeing increasing risks and exposures and discussion around cyber-security risks. As we move forward, it is fundamentally important to ensure any platform is robust and secure.
This must all be considered in the context of the UK’s decision to leave the European Union, and the uncertainty that we will see over the current years as the regulatory environment changes.
What does it mean for lawyers advising on digital projects?
Lawyers need to be abreast of changes in technology, client’s requirements and their strategic objectives.