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Farrer & Co | FinTech Update: Bank of England publishes results of FinTech Accelerator's latest Proofs of Concept

Last month the Bank of England published its report detailing the results of FinTech Accelerator's third round of Proofs of Concept – the term given to denote the evidence collected from trialling FinTech products in order to establish whether they successfully address existing issues.

Created in 2016, the Bank of England's FinTech Accelerator invites FinTech firms to collaborate with the Bank of England in order to explore technological innovations which may offer solutions to issues in central banking which the Bank of England identifies as 'priority areas'. FinTech Accelerator is comparable to the FCA's Regulatory Sandbox, offering a space in which technology can be trialled in a real-life context.

Key areas of focus

In its latest round of Proofs of Concepts, the Bank of England focussed on four priority areas:

  • identifying anomalies in large data sets (Mindbridge Ai);
  • synchronising high-value payments involving different currencies (Ripple);
  • identifying common trends from regulatory enforcement actions (Enforcd);
  • measuring the Bank of England's own progress against its internal performance goals (Experimentus).

Promising results so far…

The results of the Proofs of Concepts were largely positive. The four different FinTech products trialled produced noticeable results, improving on the existing systems the Bank of England has in place. There were also certain areas identified for expansion and further development, suggesting a promising future for these products.

MindBridge Ai

MindBridge Ai’s product focuses on enhancing data analysis with the use of technology. The Bank of England was interested specifically in the technology’s ability to detect potential anomalies in large quantities of data. Eliminating anomalies from data analysis would greatly assist the the Bank of England across all areas of its operations. 

FinTech Accelerator reported that the product was successful in detecting such anomalies and commented on the product feature which allows the user to categorise data entries as either 'safe' or 'suspicious'. The technology then responds and adapts according to the user's categorisation of data so as to produce more accurate results for that specific user. The Bank of England is keen to implement MindBridge Ai's technology for a more sustained period in order to fully assess its potential.

Ripple

FinTech Accelerator also invited Ripple to trial its blockchain technology. The Bank of England was interested in developing this tool in light of the recent release of its real-time gross settlement (RTGS) system blueprint – a system of transferring money in 'real-time', i.e. allowing a transfer to be made and cleared immediately – in order to see how blockchain technology might further refine the Bank of England's RTGS.

The trial focussed specifically on a cross-border transaction involving two different currencies using two simulated RTGS systems. The results were very promising in that transfers were successfully synchronised across the two systems, removing the need to then reconcile two ledgers. The technology also correctly identified where there were insufficient funds available to settle a payment and successfully prevented the relevant transfer from occurring. This is an interesting development in the growing acceptance by the establishment of blockchain technology.

Enforcd

Enforcd's Enforcement Database is comprised of a bank of regulatory enforcement decisions bolstered by news, commentary and statistics aimed at improving regulatory compliance. By collating this information, Enforcd's technology is able to recognise trends in regulatory enforcement in order to better pre-empt areas meriting particular attention. The Bank of England also commented on the software's capability of moulding to the individual needs of the user and highlighted as an area for further improvement the expansion of the data contained in the database to include overseas enforcement decisions, particularly those from the US. This would allow cross-border comparisons to be made which would make the technology even more valuable.

Given the wide ranging and fast paced worldwide regulatory developments to which the industry is subject, an effective tool to spot and determine trends could be very valuable.

Experimentus

Experimentus' Optimised Results for Business (ORB) product aims at optimising internal performance, specifically in relation to a firm’s Key Performance Indicators (KPIs). The product achieves this by consolidating large amounts of internal data and then providing the user with a visual representation of how the firm is performing against its set KPIs. This allows effective analysis of the firm’s compliance with performance goals. The Bank of England commented particularly on how well displayed the ORB results were visually which could prove particularly helpful in terms of effectively evidencing the Bank of England's performance for regulatory purposes.

Conclusion

The Bank of England has publically declared its support for the growing Fintech industry and the innovative products it can offer. Mark Carney's speech of April this year is just one such example of this support (link here). The results of this round of Proofs of Concept show that the Bank of England's support goes beyond rhetoric. It remains to be seen how the above products develop outside the safety net of the Bank of England's FinTech Accelerator, but it is pressing ahead with a further round of Proofs of Concept which launched in April. The results of the firms that have been selected are anticipated shortly.

If you require further information on anything covered in this briefing please contact Louise Bralsford (+44 (0)20 3375 7903), Jessica Gibson (+44(0)203 375 7811) or your usual contact at the firm on 020 3375 7000.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, August 2017

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