Barefoot Innovation Podcast

This one is for the regulators, although everyone will love it. But please share it with all your regulator friends.

In 2014, two countries, on opposite sides of the world, embarked on a path to make themselves global centers of fintech. One was Singapore, where the Monetary Authority of Singapore, MAS, began building a uniquely creative and powerful innovation ecosystem. The other was the UK, where the Financial Conduct Authority kicked off an innovation program, often in collaboration with the Bank of England.

In short order, both countries recognized that the same technologies that drive fintech also have to drive financial regulation. The whole system must transition to the digital age.

I got to know both programs very early on, starting in about 2015, so, about six years ago. The Singapore initiative is amazing and everyone should study it as a model. It has some unique elements, however, including a lot of capacity to invest in private sector innovation. For most countries wanting to build these kinds of programs, the FCA’s approach may be easier to emulate. And, as a former regulator myself, I realized long ago that we needed a case study on it, so that everyone can learn from how they have done it.

And then I came up with the perfect person to write such a study. Amy Friend was formerly the Chief Counsel of the Office of the Comptroller of the Currency, our US regulator of nationally chartered banks. Amy led the original innovation initiative of the OCC, and she had told me that she took inspiration in that effort from looking at the FCA’s program. She also serves on our AIR Advisory Council. When she retired from the OCC, I asked her to write a paper on the FCA and here it is:  The Financial Conduct Authority’s Innovation Journey: Moving Forward in the Face of Uncertainty. 

How did the FCA do this? How did they turn a traditional financial regulatory agency into an institution that is now rapidly becoming digital, tech-driven, and innovative almost by default? What challenges did they encounter? How did they overcome them? What went wrong? Did they make mistakes? What did they learn from them, and from their successes, and from the experimentation they did? What advice do they have for other regulators?

We had planned for Amy to interview people in London for the project early last year, and then COVID intervened. Instead, she talked with dozens of people by phone.

In today’s show, she shares what she learned. She describes what inspired her about the FCA’s work, including the epiphany that was a breakthrough for the OCC’s own planning. She explains what prompted the FCA to start on its innovation journey, before most of its global counterparts had begun to focus on fintech, or even heard of regtech? How do these efforts advance the FCA’s mission, including for consumer protection? How can a small innovation unit impact the broader work of a big regulatory organization? What is the role of agency leadership? How did they invent the regulatory sandbox, and what has it accomplished? How did they invent the regulatory TechSprint -- where would they even get such a novel idea? How did they shift the culture -- which, at regulatory agencies, as we all know -- tends to be traditional by design?

Amy shares with us the things that surprised her. One of them is that the FCA sees itself as a “tech activist” -- not endorsing any specific companies, of course, but setting expectations that the financial industry needs technology that keeps up with the times.

We recently set up a meeting for Amy to brief the innovation leads at the US financial agencies, in a session where she was joined by the FCA’s Francesca Hopwood Road and also by former regulatory innovation heads in the US.

I remember checking in with Amy last year, as she was drawing preliminary conclusions from her interviews. It was in the midst of COVID, and we were on a video call with her on her porch on a spring day. The thing that struck me was that as she described what she was learning, she kept smiling. You could see from the look on her face that she was learning things that were remarkable, that are just so different and interesting. It’s a great human story. The FCA has carved out a path for the rest of us. They took on the task of doing something for the first time. They were completely aware that they were taking risks -- that something that they tried could fail, that their jobs sometimes were on the line. It’s a story of vision and courage, and Amy has written about it with a storyteller’s eye. I hope everyone will read, enjoy, and share her paper.

More on Amy

Amy has had a long career in public service with over 25 years of experience in shaping financial services policy and regulatory issues on Capitol Hill in both the House and the Senate, and at the Office of the Comptroller of the Currency. From February 2013 to November 2017, she was Senior Deputy Comptroller and Chief Counsel of the Office of the Comptroller of the Currency, where she oversaw a 200-plus person law division as well as the licensing department. Amy led the agency’s efforts to understand financial innovation and its implications for the banking system and to position the agency to support responsible innovation. Those efforts resulted in the establishment of the Office of Innovation and the special purpose national bank charter.  Amy had previously served as assistant chief counsel at the OCC, leading the agency’s rulemaking on financial privacy and data security.

Prior to the OCC, Amy was Chief Counsel of the Senate Committee on Banking, Housing and Urban Affairs, where she worked on the development and enactment of legislation to address the financial crisis, including the Emergency Economic Stabilization Act (that created the Troubled Asset Relief Program). She was the principal Senate staff person responsible for the drafting and passage of the Dodd Frank Act.  She was also instrumental in drafting and enacting the CARD Act that reformed the credit card industry and protected consumers from predatory practices.

Amy has previously been in private law practice and was a managing director at Promontory Financial Group. She is currently a senior advisor to FS Vector, a boutique advisory firm working with innovative financial firms.  In 2019, Amy co-founded ALLRISE DC, an organization to promote women’s leadership in financial services through mentoring, networking and education.  She is on the board of Varo Bank, a mission-oriented mobile-bank offering consumers fair and affordable banking services and the first fintech to receive a full-service bank charter. She also chairs FinRegLab, a nonprofit that studies the use of data and technology in financial services with the goal of expanding access and financial inclusion.  Amy is on the Advisory Council of AIR.

More for our Listeners

Please follow AIR on LinkedIn and Twitter, and also follow me personally on Twitter @JoAnnBarefoot. And be sure to leave us a five-star rating on your favorite podcast platform.

Earlier this week, we partnered with Google to host a webinar called AI and Financial Regulation: Exploring Benefits and Managing Risks. You can watch the replay here.

Next up on Barefoot Innovation we have Sultan Meghji, the new Chief Innovation Officer of the FDIC who, as you will see, has a technology background and a bold vision for the future of financial regulation. After that, I speak with Deputy Governor of Central Bank of Kenya, Sheila M’Mbijjewe, who I also had the pleasure of speaking with during our Women’s Economic Empowerment Conference. Other shows include Jesse Morris of EnergyWeb, who AIR partnered with to launch the Crypto Climate Accord, as well as Melissa Koide of FinRegLab who will talk about some of the recent, important work they are doing.

I cannot believe we are more than halfway through June! Coming up, I will be doing a fireside chat with Sultan Meghji (AGAIN) at Fintech South. I’ll be at FinCrime World Forum talking about how to accelerate regtech adoption, and at the India Economic Times BFSI Tech Leaders’ Summit. I’ll also give a keynote talk next week on regtech for the ABA’s Regulatory Compliance Conference — the one and only RCC. I’m speaking on the future of compliance, and hope all the compliance folks listening will plan to join.

The FDIC is also hosting a webinar, ‘Fintech: A Bridge to Economic Inclusion,’ where I am excited to be moderating a panel discussion. The FDIC event is open to the public and I hope everyone can join.

My colleague David Ehrich and I, meanwhile, are also speaking at numerous events hosted by and for regulators, and hope to see many of you in those fascinating conversations.