Bank of England plans to tap start-up expertise

The Bank of England plans to launch a financial technology accelerator programme to tap the expertise of start-ups as a flurry of innovations reshape finance.

This may be the first time a central bank has employed this approach to R&D, a practice long used in Silicon Valley as a way to incubate young companies.

Governor Mark Carney had planned to make the announcement in his annual Mansion House speech in London on Thursday evening.

He and Chancellor of the Exchequer George Osborne cancelled their originally planned remarks at the event in tribute to Jo Cox, the MP killed in northern England earlier that day.

In a copy of his speech released by the bank, Mr Carney said peer-to-peer lenders, robo-advisers — which use computer programmes to provide online investment advice — and crypto-currencies were fomenting a potential “revolution” in finance.

“This could, with time, unbundle traditional banking models and deny banks their traditional economies of scale and scope,” he said in his speech.

Commercial lenders such as Barclays and Citigroup are using them to find ways to upgrade their aging IT systems.

The aim is to help them adapt to a marketplace that’s changing how consumers manage their money and becoming more vulnerable to attack by hackers.

Mr Carney said technology based on the blockchain, the distributed accounting database that underpins virtual currency bitcoin, will be a key focus in the programme.

The technology shows “great promise” in enabling central banks to strengthen their defences against cyber attack and overhaul the way payments are made between institutions and consumers, he said.

In January, the bank undertook a review of Britain’s payments system to determine how digital banking and currencies might make it more robust and resilient.

But Mr Carney cautioned that the BoE is still a long way from from creating a digital version of sterling on a distributed ledger.