[Newsflash n. 26]

 

Within a number of initiatives from organizations and authorities (see for instance, ESAs[1] and SEC[2] on robo-advisory, IOSCO[3] on FinTech and IAIS[4] on InsurTech) and the initial steps taken by the Commission[5], on 23 March 2017 the Commission launched a consultation on “FinTech: a more competitive and innovative European financial sector” (the “Consultation”). The Consultation is part of a wider action plan presented on the same date by the Commission[6].

The increase of investments in new technologies for the financial sector in recent years and the exponential progress of innovation in this field raise important policy and regulatory questions for EU financial services policy makers.

In the attempt to address these questions, based on the outcome of the Consultation and the work of the recently established FinTech Task Force, the Commission will present an EU strategy for FinTech setting forth those actions that would be required to support the development of financial technology and a technology-driven single market for financial services.

The Fintech revolution is the result of a confluence of technological developments that have reached the financial market and the consequences are multiple.

If, on the one hand, digitalization and technological developments may improve consumers’ and businesses’ access to financial services across the EU, on the other hand, such improvements determine an even stronger need for investors’ protection, through appropriate information, in order to ensure an efficient and competitive market.

The Consultation analyses the main characteristics and evidences of the implementation of such innovative technologies and aims at obtaining feedback from market players, in order to better define the Commission’s policy approach towards FinTech.

In particular, expressed intention of the Commission is to put in place a regulatory framework that is:

  1. Technology-neutral
    The same service should be subject to the same regulation, irrespective of the mean by which it is provided;
  2. Proportional
    The set of rules applicable to FinTech firms should be balanced to the actual characteristics of the activities they perform; and
  3. Integrity-enhancing
    Technology should be used to enhance market transparency and limit potential risks.

The Consultation is divided into four sections that describe the main policy objectives of the Commission, in relation to the possible future positive developments of FinTech:

  • Simplified access to financial services
    Key Factors: Robo-advice | Peer-to-Peer Lending | Crowdfunding | E-Commerce Finance
  • Cost reduction and increased efficiency
    Key Factors: Big Data | Cloud Computing | Distributed Ledger Technology (DLT) | RegTech
  • Improved competitiveness of the single market and reduced barriers to entry
    Key Factors: Disruption of traditional distribution channels | Lower production costs | Data Analytics | Mobility of customers | Standardization and Interoperability
  • Enhanced data security and protection
    Key Factors: Greater transparency | Storage of information to improve firms’ compliance with regulatory requirements

The Consultation takes also into account the potential downsides of the implementation of technology in the financial sector, stressing out, for example, the risks related to the collection, processing and transmission of personal data (cybersecurity, compliance and operational risks) and the uncertainty that could arise from technologies like the DLT as regards the jurisdiction and rules applicable to the ledgers as well as their legal value.

Responses to the Consultation shall be submitted through the online questionnaire before 15 June 2017.

In particular, participants are required to:

  1. Indicate whether the regulatory and supervisory framework fosters technological innovation in line with the three core principles of technologic neutrality, proportionality and integrity;
  2. Present appropriate new solutions that could help consumers gain a better understanding of financial products or services and make informed decisions.

This Consultation shows once again how the innovation in financial technology is being pivotal in the attentions of the European regulators. The Document is, in fact, the last of a long series of regulatory actions, consultations and reports issued by the EU institutions and authorities in recent years (including to address the major developments in the FinTech field).

The contribution that market players can provide in this phase is essential for shaping the future regulatory framework in such a way to enable firms (and consumers) to draw the maximum benefit from the new technologies, while ensuring the safety and rights of the subjects involved as well as the stability of the whole financial system.

We would be happy to offer you any required assistance in submitting your response or any further clarification on the Consultation or any other FinTech related matter.

 

Contacts:

Vito Vittore
Senior Partner

Marina Mirabella
Senior Partner

Elena Pagnoni
Of counsel

Luigi Bonifacio
Associate

Chiara Calzecchi Onesti
Associate

 


 

[1] ESAs, Consultations on Big Data (19 December 2016, see the relevant post on our website) and Robo-advising (4 December 2015, see our Newsflash n. 2).

[2] SEC, Guidance Update and Investor Bulletin on Robo-advisers (23 February 2017, see the relevant post on our website).

[3] IOSCO, “Research Report on Financial Technologies (Fintech)” (see the relevant post on our website).

[4] IAIAS (International Association of Insurance Supervisors), “FinTech Developments in the Insurance Industry” (see the relevant post on our website).

[5] See the revised Payment Services Directive (PSD 2), the EU Commission’s Communication “A Digital Single Market Strategy for Europe” (6 May 2015) and the EU Commission’s “Green Paper on retail financial services: Better products, more choice, and greater opportunities for consumers and businesses” (10 December 2015).

[6] EU Commission, “Consumer Financial Services Action Plan: Better Products, More Choice” (23 March 2017).