The European Parliament's Committee on Economic and Monetary Affairs (ECON) has published its final report on ' (2016/2243(INI))'.
Key points in the report
The report, which poses a motion for a European Parliament Resolution on Fintech in its broadest sense (i.e. "finance enabled by new technologies"), reflects on the state of the sector including its perceived successes and limitations. This includes, among many positive observations, notes to welcome the creation of the FinTech Task Force and the continual work by all stakeholders in areas such as open banking, blockchain and cloud computing.
On the other side of the coin, the report stresses the following:
- Financial services legislation at both the EU and national levels should be sufficiently innovation friendly.
- Fintech companies should continue to contribute positively to the development of financial intermediation.
- There is scope for improvement in the means that can be used for cross-border payments (while noting the regret of the European Parliament that there is no EU-wide European-owned credit or debit card scheme).
- There are no clear European rules or guidelines for outsourcing data to the could with regard to the financial sector.
- It is concerned about the increased use of permissionless blockchain applications for criminal activities.
Fintech and cyber-security
Some of the points raised have also proven timely given the recent WannaCry cyber attack. In particular, Parliament emphasised the need for end-to-end security across the whole financial services value chain given the large and diverse risks posed by cyberattacks. Although the main casualties of the WannaCry attack weren't necessarily financial services institutions, this incident proves that cyber vigilance and the development of sophisticated end-to-end security is a must have.
There aren’t any real surprises in the overall content of the report and it compliments much of the European Commission Fintech Consultation. It is clear, even from the limited selection of points listed in the above, that there are opportunities for fintechs to develop product solutions to some of the problems and issues identified in the report. This is implicit from the legitimisation of those issues through their express inclusion in the report and the onus on national regulators to find solutions to those issues by ensuring regulation is innovation-friendly.
We welcome recommendation for broader encouragement of regulatory sandboxes by European competent authorities – noting, of course, the excellent work done to date by the Financial Conduct Authority in forging the path for the “innovative regulator”.
This article was written by Gareth Malna, a Funds and Financial Regulation lawyer with broad experience of the regulatory issues affecting Fintechs.