What is FinTech?

FinTech is the term used to describe the impact of new technologies on the financial services industry. It includes a variety of products, applications, processes and business models that have transformed the traditional way of providing banking and financial services.

While technological innovation in finance is not new, investment in new technologies has substantially increased in recent years and the pace of innovation is exponential. We now interact with our bank using mobile technology. We make payments, transfer money and make investments using a variety of new tools that were not there few years ago. Artificial intelligence, social networks, machine learning, mobile applications, distributed ledger technology, cloud computing and big data analytics have given rise to new services and business models by established financial institutions and new market entrants.

All these technologies can benefit both consumers and companies by enabling greater access to financial services, offering wider choice and increasing efficiency of operations. They can also contribute to bringing down national barriers and spurring competition in areas such as

  • online banking, online payment and transfer services
  • peer-to-peer lending
  • personal investment advice and services

Commission's action plan on FinTech

In March 2018 the European Commission adopted an action plan on FinTech to foster a more competitive and innovative European financial sector. The action plan sets out 19 steps that the Commission intends to take to

  • enable innovative business models to scale up at EU level
  • support the uptake of new technologies such as blockchain, artificial intelligence and cloud services in the financial sector
  • increase cybersecurity and the integrity of the financial system

These initiatives mainly aim to enhance supervisory convergence toward technological innovation and prepare the EU financial sector to better embrace the opportunities brought by new technologies. This should enable innovative FinTech solutions to be rapidly rolled out across the EU and benefit from the scale economies of the single market, while preserving financial stability and ensuring consumer protection.

The action plan is part of the European Commission's efforts to build a Capital markets union and a true single market for consumer financial services. It is also part of its drive for a Digital single market.

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