Part 1: The European Commission’s Action Plan on FinTech
Currently, supervisors in the EU member states take different approaches in dealing with FinTech Start-ups and apply non-harmonised regulatory rules regarding authorisation or registration regimes and compliance. The European Commission’s newest political statement on financial innovation aims at a harmonised market.
On 8 March 2018 the European Commission published its Action Plan on FinTech and laid out its support of innovative business models and new technologies in the financial sector. In addition to ensuring a high level of consumer and investor protection and increasing cybersecurity, the Action Plan also proposes a regulatory framework throughout the Single Market.
Given that new and innovative financial services do not always easily fit under the existing EU regulatory framework, the Action Plan sketches the outlines of a comprehensive European passporting regime for European investment-based and lending-based crowdfunding service providers (ECSP). It also promotes the idea of regulatory sandboxes as a controlled space to test innovative FinTech solutions for a limited period of time and on a limited scale in coordination with the competent authority.
The Commission will host an EU FinTech Lab in Q2 this year where regulators can learn and understand from technology solution providers in a non-commercial space how their new technologies are applied to the financial sector and what regulatory concerns may exist. This is a sensible idea to ensure the regulators’ understanding and the market applicability of new technology in a neutral, constructive setting.
The Action Plan gives some hope that the EU will be a market where innovative FinTech business models can develop on a harmonised basis overcoming diverging regulatory burdens. Yet, it remains to be seen if the awaited guidance of the European authorities thereon will transfer the political vision into a practical and innovation supportive approach.