SWIFT and Innovate Finance create global fintech network
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Innotribe, the innovation arm of global financial messaging service SWIFT, and Innovate Finance, the UK members' association for fintechs, have set up the Global Fintech Hubs Federation (GFHF).
GFHF currently has 24 members, including fintech associations and member bodies, as well as several network partners from 17 cities around the world. Membership in the federation comes with access to global financial services events, like Sibos and Innovate Finance's Global Summit.
Participants will work together to foster engagement between global fintech hubs and share best practices and knowledge. The aim is to encourage greater collaboration between cities, and make it easier for fintechs to scale into new markets.
The organization could help fintechs prepare for future regulation. In April, the G20 Financial Stability Board (FSB) started examining the potential risks that fintech could pose to global financial stability. It's possible that this could result in a global regulatory framework for fintech.
If it does, fintechs will want to make sure they have some influence to ensure that regulation isn't overly onerous. Creating an organization that shares knowledge and best practices enables global fintech stakeholders to more easily agree on key concerns and present a unified front.
Consider how fintech regulations in the U.S. have been extremely restrictive thus far, but those in Europe have proven successful and allowed the region to become a hub of financial technology innovation. The U.S. would be wise to examine the policies in place across the pond and consider how to implement similar ones within its own borders.
The fintech industry is booming, with VC-backed fintech investment growing 106% to reach £10 billion ($13.8 billion) in 2015. But the new business models fintechs are bringing to market also need to be regulated, and the old models aren't sufficient. The approach regulators take will have a significant impact on how big fintech gets and how fast it gets there.
Sarah Kocianski, senior research analyst for BI Intelligence, Business Insider's premium research service, has compiled a detailed report on fintech regulation that explains how regulators in Europe are successfully growing fintech innovation and how it's becoming a model for regulators around the world.
Here are some of the key takeaways from the report:
- The financial technology sector is booming, and Europe is a leading region for growth. VC-backed fintech companies in Europe raised £1 billion ($1.5 billion) in funding across 125 deals in 2015.
- With this boom in funding comes a need to regulate the nascent industry. There are a variety of approaches — active, passive, and restrictive — that regulators can take. The EU and the UK, in particular, have taken an active approach, in order to encourage growth.
- The regulation that will have the most impact on the European fintech market is the Second Directive on Payments Services, known as PSD2. It will force banks to open up their systems to fintechs. This will allow fintechs to act as intermediaries between banks and their customers.
- The UK regulator is actively promoting its approach to regulation as a model for other countries to follow. Some of its innovations are already being copied by other regulators around the world.
In full, the report:
- Examines the different approaches to fintech that regulators can take
- Explains the key EU laws that will affect the European financial services industry in the next two years and beyond
- Explores the potential impact of new regulations
- Details the workings of the initiative central to the UK regulator's approach to fintech
- Highlights what can be achieved when regulators, governments, and fintech companies work together
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