Speakers of the session
President , EUROFI
Director of Policy, Financial Conduct Authority (FCA)
Director for Regulation and Prudential Supervision of Financial Institutions, DG for Financial Stability, Financial Services and Capital Markets Union, European Commission
J von Weizsäcker
MEP, Committee on Economic and Monetary Affairs, European Parliament
Head of Unit, Health and Well Being Member, FinTech Task Force, DG for Communications Networks,Content and Technology, European Commission
Greg Van Elsen
Senior Financial Services Officer, Legal and Economic Department, The European Consumers Organisation (BEUC)
of New Digital Businesses, Banco Bilbao Vizcaya Argentaria (BBVA)
Chief Risk Office Global Corporate Business, Zurich Global Corporate
Partner, Financial Services Regulatory Centre of Excellence, EMA Region, KPMG
Objectives of the sessionThe session is dedicated to identifying how the EU Digital Single Market Strategy (DSMS) is unfolding in the financial services area. It will notably try to clarify the challenges specific to existing and incoming players, assess actual achievements in the EU and the difficulties posed to the DSMS by cybercriminality. The session should finally outline the possibly relevant regulatory initiatives and financial infrastructures required.
Points of discussion
What is the digital SWOT of EU retail financial services?
- What are the digital opportunities and threats for the EU financial sector in the EU and globally? What are the actual digital achievements of EU financial services/players, and how do they compare with other geographies in terms of digital innovation, efficiency, leadership, etc.?
What are the regulatory challenges to improve digital creativity and competitiveness in the EU in the financial area?
- What are the main regulatory issues faced in the area of financial services by the different players addressing digital challenges? What progress can be expected from the EU Digital Single Market Strategy? What additional regulatory initiatives are required in the financial area given notably the existence of the CRD and PSD2, to facilitate digital financial initiatives in the EU?
What are the possible infrastructures required and the cyber-risk?
- What interbank efforts would be required to deliver high performance financial infrastructures to support the DSM? What are the specific cybersecurity issues potentially hindering the digitalisation of the financial sector?
Background of the sessionThe global economy is increasingly being digitised and technology is being integrated in all the sectors of the economy and in particular the financial sector. Already, digitalisation has transformed the financial industry as the industry distributes and sells on-line and provides better information and advice, and enhanced choice to consumers who now expect the services to be available anytime, anywhere. In addition, cloud computing, big data as well as distributed ledgers (e.g. blockchain) may further disrupt financial services in the coming years, enabling quicker, cheaper and safer transactions notably in the area of payments or financial transactions.
In this context the legislation in the EU, in particular in the financial area, is now expected to be designed to make the most of the productivity, efficiency and innovation potential that “Digital” can provide. The EU financial sector has initiated its cultural revolution and counts players already at the leading edge in these matters globally. The industry will also have a key role to play in developing certain transaction services, such as electronic identification in the EU, which is one of the ten priorities encompassed in the Digital Single Market strategy. Finally, in an increasingly global economy, European Union market integration and innovation are even more essential to preserve the continent’s competitive edge.
Yet, EU policies in the financial area must also contribute to the cybersecurity challenge, e.g. data protection, security of digital networks, safety of apps that can be downloaded from the Internet, etc. Cyber risk mitigation is also critical for a smooth development of digital services. In this respect to promote digital investments, the insurance sector has an important role to play by protecting liability costs from attacks, business interruption or privacy breaches. This requires however a common effort to gather risk related data given that businesses are reluctant to disclose sensitive information.
P2P-lenders, robo-advisers, price comparison websites, etc. might also lead the consumer to take poor decisions, while digitally illiterate could be unable to access better-value products. Privacy risks are also likely to increase. Consumer protection issues must be considered at the same time as digital products are being adopted.
Finally, while the EU digital policy challenge is to be “Internet ready”, it must also avoid discriminating between digital and physical worlds. While regulatory barriers discourage new entrants, incumbents should also have the same opportunities to contribute to innovation, something that existing financial regulations may not favour. Digital is actually a specific ecosystem, in which fair competition demands that products or services all receive similar regulatory treatment.
The creation of so-called “sandboxes”, in which innovators be they Fintechs or financial institutions, can test ideas in a legal environment free from regulatory uncertainties but with relevant consumer safeguards, is vital for them to effectively balance fostering innovation, financial stability, security and safety. They must also be required to ensure that consumer protection is factored into the design of financial products, right from the beginning. EU regulators must also provide a regulatory framework enabling the Fintechs to better access the market of payments services whilst strengthening security standards for the benefit of all users.