Written by Nicola Vaccari on Monday August 21, 2017
Nowadays technological innovation is ceaselessly impacting on many key sectors of our lives, and the financial industry is not immune to it. European institutions are aware that technology-enabled and technology-supported financial services (FinTech) represents a great opportunity for the financial industry. It can lead to a more integrated market for financial services, bringing benefits to both consumers and financial service providers. This awareness has led some European institutions to undertake measures to develop an efficient and consistent European approach to FinTech. Even though discussions around FinTech and other technological related innovations such as RegTech – defined by the UK’s FCA as a ‘sub-set of FinTech that focuses on technologies that may facilitate the delivery of regulatory requirements more efficiently and effectively than existing capabilities’ – are growing and involving many more actors such as, for instance, European Supervisory Authorities (ESAs) and the European Central Bank (ECB), in the following it shall be seen that the recent main steps on the topic have been undertaken by the European Commission and European Parliament.
On 23 March 2017, the European Commission organised a conference on FinTech to feed the debate on whether EU regulation fits for the new technological innovations; downstream the conference, the commission announced its ‘Consumer Financial Services Action Plan’, which addresses the main issues emerged from the 2015 green paper on retail financial services. In particular, the mentioned Action Plan aims at strengthening the EU single market for retail financial services and harnessing the FinTech potential to improve European consumers’ access and choice to financial services. The European Commission recognised, among other things, the potential benefits that FinTech could bring to EU real economy abreast the need of updating and developing the existing legislative framework in order to cope with the new scenario.
The same day, the commission launched a targeted consultation entitled ‘FinTech: a more competitive and innovative European financial sector’ (the ‘Public Consultation’), which ended on 15 June. This was done for the purpose of gathering input from both the providers and consumers of financial services to develop an EU strategy for FinTech setting out what actions should be taken. The Public Consultation received 226 responses, the summary of which shall be published at a later date.
Highlighted in the Public Consultation document are the three core principles on which the commission intends to focus, namely (and in brief): i) technology-neutrality, so that the same rules apply to the same activities and a level-playing field is preserved; ii) proportionality, so that the rules are capable of adapting to different types of entities; iii) improved integrity, to ensure more market transparency for consumers.
Alongside the aforementioned actions, it is worth recalling the Commission's commitment on the matter. To support FinTech in reaching its potential and with the awareness of its cross-sectoral nature, the commission set up in December 2016 a FinTech task force with a multidisciplinary approach to assess the topic and set up a coordinated European response.
Meanwhile, in May 2017 the European Parliament published a position paper titled ‘FinTech: the influence of technology on the future of the financial sector’ where it is recognised the need for a comprehensive strategy for FinTech, the creation of a forward-looking European policy on the topic and calls on the Commission to publish a FinTech Action Plan – coherent with its Capital Markets Union and Digital Single Market – to speed up FinTech in Europe. The European Parliament highlighted the need to create a FinTech friendly environment and recognised the centrality of the principle of innovation in the production of new legislation. At the same time, the parliament called for conducting an assessment to understand the causes of the uncertainty of the current EU legal scenario before creating new rules and amending the existing ones.
Although at an early stage, the commission and parliament are moving toward defining an EU’s FinTech strategy. FinTech and its potential beneficial effects are just one side of the coin: On the other side, there are risks that have to be identified and assessed, legal complexities that have to be disentangled and the resources allocation on compliance rather than on innovation that companies should bear to cope with a new legal framework. In this final respect, RegTech may facilitate the delivery of regulatory requirements limiting the compliance expenses.
The topic remains ‘hot’ and many actors are moving alongside the European Commission and Parliament. The European Banking Authority (EBA), for example, on 4 August published a discussion paper with the results of its own assessment of FinTech activities and proposals.
This piece was written for ICA by Nicola Vaccari.
Nicola Vaccari graduated from the University of Bologna with a Masters in Banking and Finance (LL.M) at the University of London (2007). Nicola works in the corporate affairs department of an insurance company and has developed commercial experience with the banking and legal sectors in Italy and the UK respectively.
Nicola holds an ICA International Diploma in Governance, Risk and Compliance.
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