When Chancellor George Osborne declared last year that the new Innovative Finance ISA would be open to investors from the start of April 6 2016, he evidently under-estimated the impact on the Financial Conduct Authority (FCA).
Given that the idea was given its first public airing a year prior to that, in summer 2014, he probably felt that the timetable was not too ambitious. Subsequent events have proved him wrong.
Despite all the fanfare and debate surrounding the new Innovative Finance ISA, the FCA announced yesterday (31 March) that only eight platforms out of a total of 94 applicants have so far received the full authorisation they need to offer this product to the public. For the record, they are: Go2Partners, Formax Credit UK, Crowdstacker, Resolution Compliance, Clasp Investments, Crowd2Fund, Gracombex and EdAid: few of them yet household names.
The remaining 86 are waiting on tenterhooks to learn if they have succeeded in meeting the rigorous criteria.
Hardly surprising, then, that many platform operators, all of whom have had their applications in since the FCA deadline last October and have invested significant sums of money in the process, are said to be seething.
The public, of course, has a right to be protected and it is difficult to argue with the line that, irrespective of the number of applicants, quality control should be applied equally and that the screening process should not be compromised.
However, from a commercial point of view, the continuing delay in granting authorisations not only serves to confuse the public about the availability of the IF ISA, and potentially dampens enthusiasm in the process, but also threatens to damage the prospects of the platforms themselves.
Looking further afield, there are plenty of examples of financial regulators from around the world being overwhelmed by the speed of innovation and disruption in the financial sector. At a recent meeting of the Financial Stability Board in Tokyo, which was attended by central bankers, regulators and finance ministry officials from 20 different global economies, the Governor of the Bank of England, Mark Carney, said:
“The important thing for us as a member of the FSB is to be moving in parallel with these developments and not to be stifling innovation, [we need to be] able to apply them in a way that improves the resilience of the system.”
And therein lies the problem: how to filter out the undesirable elements without killing off the entire project.