Potential Ban on Credit Cards from FCA
There have been significant changes happening to the United Kingdom gambling industry. Respective alterations to this market follow after the UK Gambling Commission confirmed that credit cards would be banned starting April 14th. This means that bettors in Great Britain cannot wager on slot machines, table games or sports with their credit cards. Analysts in foreign exchange markets are concerned that this legislation will be copied and implemented by the Financial Conduct Authority. It’d follow suit with multiple other forms of regulation that the FCA copied from the UKGC. These markets are often linked because of the similarities in regulation. Subsequently, executives in British financial market have forecasted this impending legislation.
Analysts are surprised that the financial conduct authority hasn’t imposed these restrictions already. Individual traders can use large quantities of money that aren’t technically in their possession, making foreign trades that are ultimately backed by corporations like Visa and MasterCard. It’s a sneaky way to increase profits when funds aren’t immediately available. Subsequently, analysts anticipate that credit card bans will be implemented within twelve months.
The Founder & Chief Executive Officer for OSS Consult Limited, Rod Martenstyn, spoke on this potential ban. He stated: “It would not surprise me if such a ban were imposed within the next 12 months. Then again, the FCA has been publicly slammed and hurt as a result of the London Capital & Finance mini-bond scandal, and has focussed more on the mini-bond sector in the last year, plus it remains to be seen how the approach of the new Chief Executive of the FCA will impact the retail FX/CFD sector in the UK, once the incumbent, Andrew Bailey, moves on to his new role as governor of the Bank of England in March 2020.”
Some individual analysts believe there haven’t been any indicators towards the restriction of credit cards. The CEO & Founder of Expozive, Nick Lewis, stated: “Right now there are no indications that the FCA may apply similar restrictions on credit card payments. There has not been the same level of coverage or political grandstanding on Financial Trading as there has been with gambling. If this changes, then I believe the FCA may follow suit. There is a second question, which is whether the credit card companies may decide to restrict transactions regardless of any regulatory requirement. Again there is no indication, yet this will happen. Even if it does, gaming has already built enough of the alternative payments industry to reduce the effects should this occur.”
Is FCA Intervention Required?
Many investors and analysts have begun to question the requirement of the Financial Conduct Authority. Faith in these regulators was lost after the European Securities & Markets Authority created the temporary product intervention measures act. This legislation would become fully implemented throughout 2019, meaning a permanent restriction of leveraging. It resulted in significant impacts on global retail trading markets, with numerous brokers shutting down their businesses. Profit volumes for the remaining brokerages were minimal and took more than sixteen months to recover. The financial conduct authority implementing a restriction on credit cards would create an even more significant impact on retail investors. It’s estimated that 85% of Great Britain’s FX traders would switch over to unrestricted markets like Nigeria or South Africa. The volumes for trading in the United Kingdom would be almost non-existent.
Multiple executives are in favour of restricted loan access to traders and investors. Often these loans aren’t paid back and receive an influx of credit. Clients often use their credit cards or take out personal loans to account for future foreign exchanges. Executives believe that these individuals shouldn’t be permissible for any formatted loan. Rod Martenstyn is one of the few executives that doesn’t think the 2018 ESMA regulations were enough. He stated: “In answer to the first part of your question, not really, some of the measures were not thoroughly thought out, and just opened up methods of circumvention. The sector did state in their consultative feedback to ESMA and national regulators that could be the case, all of which was dismissed. Whether that be firms taking steps to re-categorise retail clients as professional clients, opening up offshore entities with lighter regulation or moving clients to group overseas regulated entities or the issuing of products such as turbos.”
Rod Martenstyn continued his comments, mentioning that the British trading markets want to avoid banning credit cards and instead create restrictive regulation centred around credit-based loans. He stated: “One of the biggest shortcomings of the gaming industry is a failure to come together as a single voice to negotiate and advise on a governmental level. Back in November, I was a summit of Gaming Leaders. The Gaming Commission had already issued warnings that it was about to pass a raft of new restrictions and had given an open call for the Gaming Industry to come to the table or they would make decisions unilaterally. History has now shown that they could not.”
The statements to reports from Rod Martenstyn completed with the following: “The Financial Trading sector needs to learn from this as a matter of urgency and set up a council of leaders that can negotiate and advise on a governmental and regulatory level. If not, we could see unilateral decisions being made in the future for Finance too. The second lesson to be learned from gaming is that Financial Trading industry needs to be seen to be responsible and promoting consumer protection, as this will fend off the eyes of the public, the press and the regulator.”