Keynote speech at the inaugural event of the European Forum for Innovation Facilitators
Brussels, 2 April 2019
Ladies and Gentlemen,
It is a pleasure to welcome you to the launch of the European Forum for Innovation Facilitators.
The European financial sector has changed significantly in the last 10 years. We had a major financial crisis, which changed the sector itself and the regulation that supports it. And there is currently a wave of digitalisation that is washing over the sector.
This has already changed how the whole sector is working, including banks. And it has democratised financial services, giving consumers the option to use financial services not just during the opening hours of their local bank, but whenever they need it.
Despite the fast technological development, Fintech is still in its early days. This means there is plenty of unrealised potential for ground-breaking innovation. With the block chain and distributed ledgers, companies could drastically cut costs, reduce intermediaries, and increase safety for consumers. And more disruption is on the horizon, with cloud computing, Artificial Intelligence and machine learning.
So the question for Europe, and for all of us, is simple: How do we make sure that the EU stays on top of this wave of digitalisation and new technology? How can we ensure that innovative start-ups prefer to stay in Europe instead of moving to the US or Asia?
To answer this question, we will need to find a good balance: helping our companies – new and old - to innovate, while protecting consumers and safeguarding financial stability.
But this immediately raises another question. Supervisors represent the first point of contact for innovative companies that are trying to enter the market. So are they ready to accommodate this innovation, and tackle the risks that it brings? This is what we are here to discuss today.
To make sure that Europe's financial sector seizes the opportunities of new financial technology, the Commission adopted in March of last year the EU Fintech Action Plan. It sets out concrete steps for a more innovative and competitive EU financial industry.
For example, we have set up an EU Fintech Lab for supervisors, technology providers and financial institutions to deep-dive together into specific technologies. So far, the labs have focussed on cloud outsourcing and artificial intelligence, and work will continue this year.
While we were working on our Action Plan, we also saw that a number of Member States were setting up innovation hubs or regulatory sandboxes. And they seemed to be working well. In particular, they provide a number of advantages, including:
testing new business ideas and models in a supervised environment, which reduces risks;
helping newly tested products to access the market while staying within the rules;
and on top of that, allowing us to get direct feedback on whether these rules are fit for purpose.
This is why our Fintech Action Plan encouraged Member States to set up these innovation facilitators. We believe this will help to increase the competitiveness of the EU's financial sector.
We also asked the European Supervisory authorities to map existing sandboxes and innovation facilitators across the EU. They have done an excellent job on this, so let me turn to their results.
Already, there are 21 innovation hubs in the EU. Some of these innovation hubs have already existed for more than 2 or 3 years, and have met with hundreds of innovative companies. And two more innovation hubs are being created as we speak. This means EU Member States have fully understood the great potential of closer cooperation between market participants and supervisors.
But when it comes to encouraging financial innovation, there is no denying that some countries have advanced further than others. For example, the innovation hub of the United Kingdom's Financial Conduct Authority is reported to be serviced by over 30 staff, including some that are full-time. This is much more than others have.
The report also counts 5 operational regulatory sandboxes: in Denmark, Lithuania, The Netherlands, Poland and the UK. In addition, several others in various stages of planning and setup.
We believe that this is the right way forward. So I hope that today’s meeting will encourage those Member States that are still reluctant, to take the step and set up a regulatory sandbox of their own. Overall, I would like to thank the European Supervisory Authorities for their excellent work in carrying out this mapping.
In fact, the ESAs are well placed to play an even more important role on Fintech in the future. Because we need a common EU supervisory culture for technological innovation. We recently reached an important political agreement on our review of the European Supervisory Authorities. Among other things, this will allow them to increase their focus on Fintech and technological developments.
In particular, the ESAs will be tasked with coordinating technological innovation instruments and tools set up by national supervisors, such as innovation facilitators. In addition, they will promote information sharing on cyber threats, incidents and attacks, to help enhance the security and integrity of the European financial sector.
Let me now finally turn to the forum we are launching today. It represents an important milestone for the EU to become a global Fintech hub.
Today, the existing innovation hubs and regulatory sandboxes are national schemes. Even if we understand that certain authorities have shared information and experience already, this has not been put into system yet. But as we all know: to support innovation across the EU, it is not enough for each to work in their own bubble. We need to align national practices, and learn from each other.
And for EU Fintechs to scale up in a single market, we need a harmonised approach. Our proposal to allow Crowdfunding platforms to operate across the EU based on a single license is one example of how harmonised rules can help smaller companies to scale up across the EU. And I am pleased that the European Parliament recently adopted its report on this proposal.
But we believe that more coordination and cooperation is needed also when it comes to innovation hubs and sandboxes. This would allow new Fintech solutions to more easily scale up in the Single Market, while maintaining a level playing field.
The forum we are launching today is a joint response by the Commission and the ESAs to enable that:
It will create a network of national supervisors for exchanging best approaches to Fintech.
It will enable us to identify regulatory and supervisory obstacles early on, allowing us to address them more quickly at EU level.
And it will allow competent authorities and the ESAs to enhance their capacity and share knowledge. For example, significant work has been carried out at national level on ICOs or the use of Artificial intelligence in finance. It would be of course very useful to share the outcomes of that work among all supervisors.
I hope that in the future, this Forum is used to exchange views with other players, including policy makers, FinTech companies and other institutions.
Ladies and Gentlemen,
Innovation is a key component of the engine that supports economic growth in the EU. But it needs a favourable environment to flourish and develop.
I believe the European Forum on Innovation Facilitators will help us to provide this environment. By better cooperating and learning from each other, we can help turn the single market into an environment where Fintechs can innovate, scale up, and compete. This is the best way for Europe to surf the wave of financial innovation.
Thank you very much.