Consumer Duty: The FCA’s Vision for Tech Innovation and Regulation

On 23 January 2024, FCA Chief Executive Nikhil Rathi delivered a speech on consumer facing technology and how it can be used as a force for good to protect consumers and markets while making sure it continues to embrace innovation. 

In his speech, Mr Rathi considers the use of consumer technology in different scenarios to highlight its potential to improve financial inclusion, access, choice, and outcomes for consumers, but also generate new risks and challenges, such as data privacy issues, cyber security, digital exclusion, and market concentration. He states that we are at a global inflection point in the rise of technology in financial services and he wants the FCA to be at the forefront of enabling technological innovation, while also using and adapting its existing regulatory tools to protect consumers and markets. He explains how the FCA can balance innovation and protection by using a range of tools and approaches, such as:

• The Consumer Duty, which can allow innovation in AI without excessive regulatory intrusion by focusing on outcomes. He considers that investment in technology to tackle legacy infrastructure or to glean better understanding of customers’ needs can help firms with Consumer Duty compliance. In this context he also warns that firms can expect more deployment of the FCA’s criminal powers in the year ahead as it acknowledges the importance of deterrence through appropriate consequences for those causing markets and consumers serious harm.
• The Digital Regulation Cooperation Forum, which is a collaboration between the FCA and other regulators to tackle online issues and support government on new AI frameworks. He mentions how the FCA works with the ICO, Ofcom and the CMA to tackle illegal online financial promotions, working on promoting competition and data protection.
• The Innovation Advisory Group, which is a regular forum for the FinTech and RegTech sector and the FCA to discuss issues and opportunities to inform the FCA’s innovation work. He highlights how the FCA engages with the industry and other stakeholders to understand their needs and challenges and to provide guidance and support.
• The Digital Sandbox, which is a testing environment for innovative solutions that address specific challenges, such as financial resilience, climate change, and fraud prevention. 
• The Global Financial Innovation Network, which is a network of over 60 regulators and international organisations that collaborate on cross-border innovation and regulatory issues. He emphasises how the FCA fosters global cooperation and learning on financial innovation and regulation.

The FCA is also engaging with various stakeholders, such as consumers, firms, academics, and policymakers, to understand their views and expectations on consumer tech, and to inform its regulatory strategy and priorities.

Mr Rathi concluded by calling for a collective effort from all parties involved in the consumer tech ecosystem, to ensure that it delivers positive outcomes for consumers and society, and to maintain the UK’s reputation as a global leader in financial innovation and regulation.