Openness versus Certainty of Regulations – What is more enabling?

Both openness and certainty are important to establishing what is termed as an “enabling” financial services(FS) regulatory environment.

Firstly, what is an enabling regulatory environment?

Just as plants would struggle to grow and survive without the right soil, climate and care, businesses too require the right mix to grow and thrive. For families and individuals to live full and happy lives it is important that the right kinds of businesses take root to help provide both the right kinds of products and services as well as gainful, fair employment.

This summer while caring for my Aloe Vera plant I learnt that over-watering could lead to disastrous consequences. My beautiful young plant lost it’s firm, upright disposition and adopted a slothful, “who cares” stance, until I realised all it needs is a few drops of water. Right beside it though, my Vietnamese Coriander wanted not just to be always very well-watered but also some “emergency rations” to be made available in a saucer below, to be drawn on as needed.

I had an important role as carer – I could not be over-zealous with one plant and had to force myself to leave it be, while providing the other a totally different level of care. Once I learnt my lesson peace reigned and, in the end, there was little to do to achieve happy plants.


Openness and Certainty

Regulators around the world have a considerably harder learning curve as there are a myriad of “do’s and don’ts” they must get right to do what we expect of them. So, forgive me for simplifying this but we tend to categorise regulatory stance on two main axes – Openness and Certainty.

Openne ss can spur or stifle innovation

Openness refers to the stance on who can offer financial services – just traditional players such as banks or also mobile operators, handset providers, global tech companies and others. Speaking of global companies, locality is another important aspect of openness. For the longest time, PayPal struggled to enter China, and global banks and money transfer operators had to create a complex set of partnerships to allow them to provide services across 200+ markets.

It is often critical for a regime to be relatively closed to protect fledgling local industries but there is always the danger of corrupt practices arising in an over-protected environment. The mix of products and services that become available to the population determine whether the next Facebook can be nurtured along or small enterprises are mercilessly squeezed out by providers enjoying dominant positions. In the UK, we enjoyed as open a regulatory environment as we could wish for, but the price has proved high – yet veering too far in the other direction can have equally disastrous consequences.

Certainty is established by each individual action

Certainty is something different but to my mind equally important. Every day that a company continues operations in a specific country, it is making an investment that it hopes will pay off. Investment is not one time only, but entering and leaving a country are often given more importance and we forget those who are simply making business as usual decisions on incremental investment.

If a country cannot create a level of trust in its institutions and governing bodies this can create levels of uncertainty that will destroy years of painstaking, rigorous work. Certainty makes the difference between whether a company can recoup the expenses on licensing and processes that it sets up. Certainty is also connected to fairness. If one company can get away with something, why should the next one not try? Certainty helps create level playing fields.

Charismatic regulators

Independence of regulators and cultivation of the highest calibre of professionals will ultimately, over a long period repay the people of a country.

Today digital trends facilitate an osmosis of innovation and services across jurisdictions that threaten traditional ways of protecting markets. How a country embraces and regulates the openness and certainty of their regulatory environment will impact on their position in the pecking order of tomorrow. Certainly, it will impact on GDP but more importantly it will impact on how that country is perceived by the world.

It is all too easy to find fault with our regulators. When things seem to be working it is easy for us to forget they exist. When the economy is playing up, they could be the first we turn on.

It is right and proper to be ever vigilant but we should never forget the critical role our regulators play and just how vulnerable they are. We must strive to educate ourselves to support and monitor them because the decisions they make each day do not just impact us – they determine the quality of lives of our children and grand-children.

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About Charmaine Oak

Charmaine Oak is the practice lead for Digital Money at Shift Thought. She has over 27 years of experience of creating and delivering solutions to market. Her skills and experience are at the intersection of mobile, banking and payments. She brings a unique perspective, having contributed to significant ventures at leading global companies: Western Union - one of the world’s largest financial brands, France Telecom/Orange – a leading mobile operator, Royal Bank of Scotland – a leading bank, LogicaCMG – the Pioneer in SMS and Wipro – one of the world's largest IT service providers.

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