The European Commission has unveiled an action plan on how to harness the opportunities presented by technology-enabled innovation in financial services.
The European Commission says Europe should become a global hub for fintech, with EU businesses and investors able to make most of the advantages offered by the Single Market in this fast-moving sector. As a first major deliverable, the European Commission is also putting forward new rules that will help crowdfunding platforms to grow across the EU’s single market.
The Fintech Action Plan envisages to enable the financial sector to make use of the rapid advances in new technologies, such as blockchain, artificial intelligence and cloud services. At the same time, it seeks to make markets safer and easier to access for new players. This will benefit consumers, investors, banks and new market players alike. In addition, the European Commission is proposing a pan-European label for platforms, so that a platform licenced in one country can operate across the EU.
The action plan is part of the Commission’s efforts to build a Capital Markets Union (CMU) and a true single market for consumer financial services. It is also part of its drive to create a Digital Single Market. The Commission aims to make EU rules more future-oriented and aligned with the rapid advance of technological development.
The Fintech Action Plan
The financial sector is the largest user of digital technologies and a major driver in the digital transformation of the economy.
To prepare the Fintech Action Plan, the Commission carried out a public consultation in March 2017 to gather stakeholders’ views on the impact of new technologies on financial services. In responding to the public consultation, many respondents underlined that fintech, and technological innovation in general, were drivers of financial sector development, with huge opportunities in terms of access to finance, operational efficiency, cost-saving and competition.
The plan sets out 23 steps to enable innovative business models to scale up, support the uptake of new technologies, increase cybersecurity and the integrity of the financial system, including:
- The Commission will host an EU Fintech Laboratory where European and national authorities will engage with tech providers in a neutral, non-commercial space;
- The Commission has already created an EU Blockchain Observatory and Forum. It will report on the challenges and opportunities of crypto assets later in 2018 and is working on a comprehensive strategy on distributed ledger technology (DLT) and blockchain addressing all sectors of the economy.
- The Commission will consult on how best to promote the digitisation of information published by listed companies in Europe, including by using innovative technologies to interconnect national databases. This will give investors far easier access to key information to inform their investment decisions.
- The Commission will run workshops to improve information sharing when it comes to cybersecurity.
- The Commission will present a blueprint with best practices on regulatory sandboxes, based on guidance from European Supervisory Authorities.
It is currently difficult for many platforms to expand into other EU countries, the Commission believes, and this is why crowdfunding in the EU is underdeveloped as compared to other major world economies, and the EU market is fragmented. One of the biggest hurdles is the lack of common rules across the EU. This considerably raises compliance and operational costs and prevents crowdfunding platforms from expanding across borders.
The new proposal will make it easier for these platforms to offer their services EU-wide and improve access to this innovative form of finance for businesses in need of funding.
Once adopted by the European Parliament and the Council, the proposed regulation will allow platforms to apply for an EU label based on a single set of rules. This will enable them to offer their services across the EU. Investors on crowdfunding platforms will be protected by clear rules on information disclosures, rules on governance and risk management and a coherent approach to supervision.
Click here to read the full Fintech Action Plan (PDF file).