The United Kingdom is seeking help from U.S. state officials to prepare for Britain’s entry into the growing American market for new financial technologies.
Representatives from the British Treasury hosted a delegation of six state financial services administrators and representatives from the D.C.-based Conference of State Bank Supervisors in London last week for meetings on the differences between each country’s regulatory systems in an effort to lay the groundwork for greater trans-Atlantic collaboration in the growing fintech industry.
“The U.K. government has an awareness that the states are a big piece of the regulatory ecosystem for U.K. companies coming and operating in the United States,” Margaret Liu, a senior vice president and deputy general counsel at the CSBS, told CQ Roll Call. “Clearly there’s an awareness of the role that state regulators play.”
For the British, the meetings represented an effort to help U.K. fintechs, which may only need operating approval from the central government, navigate the more complicated U.S. regulatory landscape, in which companies must be approved by each state in which they do business.
“The U.K. is a much smaller country than the U.S., and they don’t have the same division of power and responsibilities that we do,” Liu said. “They have one-stop shopping, and so there’s a learning curve to doing business in the United States.”
The delegation met with officials from the British Treasury, the Financial Conduct Authority and the Bank of England, Liu said. In a statement, Antony Phillipson, the trade commissioner for North America and consul general in New York, said he hoped the trip would “reinforce the importance of the close relationship between our financial ecosystems.”
“We are also both innovation hubs, particularly for fintech, and I look forward to seeing how we can work even more closely with these agencies going forward,” Phillipson said.
The United Kingdom’s departure from the European Union earlier this year is also driving the country’s interest in understanding the U.S. regulatory structure, Liu said.
“Our sense from the government was that they felt it even more important to be building relationships directly with U.S. regulators,” Liu said. “These are relationships that they might have traditionally relied on the European Union to handle, and that’s not going to be the case going forward.”
Liu said the British officials were interested in efforts by state banking regulators to make nationwide operability more efficient by making each state’s licensing process more consistent. One of CSBS’ current initiatives, Vision 2020, is aimed at creating an integrated system for licensing and supervising fintech startups throughout all 50 states.
Bret Afdahl, the director of the South Dakota Division of Banking and chairman of CSBS, said the initiative could be a game-changer for British fintechs doing business in the United States.
“Payments, lending and banking innovations are changing the fabric of financial transactions and the way business is conducted around the world, calling on regulators to think differently about supervision,” Afdahl said. “U.S. state regulators work together to take a networked approach to the supervision of financial services, and we welcome this opportunity to expand that network to include international partners.”
In addition to Afdahl, the CSBS delegation to London included financial services officials from California, Illinois, Texas, Georgia and New York.
Last week’s trip by state officials marks the latest step in the two countries’ efforts to streamline trans-Atlantic growth of the financial technology industry. Last May, the U.S. Treasury Department announced that it was forming the Financial Innovation Partnership with the U.K., which is aimed at encouraging collaboration between companies and sharing regulatory expertise.
Heath Tarbert, the Treasury’s former acting undersecretary for international affairs, said the partnership would help “write a new chapter in the long-standing friendship between America and Britain.”
Collaboration between the governments is likely to come as welcome news for the private sector, which has long complained that the U.S. is lagging behind Europe in terms of forward-thinking regulatory measures designed to spur innovation. At the same time, U.S. investment in financial technology has outpaced Europe.
Alastair Mitchell, a San Francisco-based venture capitalist who helps American and European countries establish themselves on either side of the Atlantic, wrote in a blog post for TechCrunch in January that the U.K. has already taken steps to drive innovation. For example, the Financial Conduct Authority has created a regulatory “sandbox” for fintech startups.
“European regulators have focused on reducing barriers to fintech growth rather than protecting the status quo,” Mitchell wrote. “While it is inevitable that regulations will come, if fintech entrepreneurs take the action to engage early and often with regulators, it will ensure that the regulations put in place support innovation and ultimately benefit the consumer.”