Task Force on Financial Technology
Seeing the rapid digital transformation of financial services and the impact these changes are having, not only on the sector but also more broadly on consumers, customers, regulators and supervisors, the European Commission set up, last year, an internal task force on financial technology. Because of the cross-sector nature of FinTech, the task force needed to have a multidisciplinary approach that would allow a broader perspective on technological innovation. This obviously meant involving all the relevant Commission services with expertise in the different areas of the financial sector such as banking, securities, asset management, insurance and financial reporting. But it also meant involving the departments dealing with technology, data and competition.
The task force started its work with three clear objectives: first to make sure that all policy work across the board is informed by and takes account of technological innovation; second, to assess whether existing rules and policies are fit for purpose in the digital age; and thirdly, to identify actions and proposals that could harness the potential opportunities FinTech offers while also addressing the possible risks. In practice, the task force has been looking at the existing frameworks within EU Member States, talking to relevant stakeholders and considering the case for a coordinated European response.
The work is still in its early stages, but a few important questions have already started to emerge. For instance, how to combine the need for a level playing field between firms carrying out regulated activities with the need to foster technological innovation in Europe, while preserving financial stability and investor protection. How to ensure that legislation and regulation do not hamper innovation and remain future proof. And the importance of ensuring that supervisory practice takeS into account the role of technology and data in the provision of financial services.
Some countries have already been looking at the impact FinTech has on supervisory practices, to ensure that supervision covers innovative finance but also to make sure that supervision doesn’t limit companies' ability to innovate. Some Member States have proactively developed methods to support innovative businesses and learn from them. They did this by setting up FinTech Innovation Hubs and allowing supervisors to work with firms as they are testing their activities (by creating so-called 'regulatory sandboxes'). Protecting consumers and investors is at the heart of the task force's work; it is also looking at the role the EU could play to increase cross-border supervisory approaches and facilitate the work of such hubs and sandboxes. The task force will also be looking into a number of other areas, including cybersecurity, platforms, cloud computing and distributed ledger technology/Blockchain.
Many of these issues were discussed among the roughly 430 participants who took part in the #FinTechEU conference organised by the European Commission on 23 March in Brussels. The conference brought together representatives from the financial services industry, both incumbents and FinTech start-ups, as well as consumer organisations, national regulators and supervisors to share their experience and debate what the best way forward is. The conference's success demonstrated clearly that there is a huge interest in this area and a general willingness to ensure that the EU's policy framework really is fit for the new digital reality.