On 8 March 2018 the EU Commission
adopted the FinTech
Action Plan: for a more competitive and innovative European
financial sector, following a Public consultation (on which we reported here). The
Action Plan aims towards a future-proof regulatory framework by creating
favourable regulatory environment for the flourishing of FinTech
services and products throughout the EU. This
initiative fits well with parallel efforts to create the Digital
Single Market and the Capital Markets Union.
Although the use of technology in the provision
of financial services and creation of financial products is ever increasing,
the existing (large) discrepancies between Member States in the
regulatory framework under which FinTech firms operate had not been
ameliorated. Some Member States like the UK have adopted tailored approach to
some, arguably most common, FinTech services and products (such as peer-to-peer
lending and crowdfunding) and created a 'Regulatory Sandbox' to subject selected FinTech
firms to the existing regulatory environment. The majority of Member
States however does not have special rules and regulatory/supervisory
approach to these firms and their products and services are being subject
to general rules designed for 'traditional' services and products. The
discrepancies in regulatory approaches (from setting up a
FinTech firm to offering products and services and supervising their
operations) is an obstacle for the development of Single Market in this sector.
In the Action Plan the EU Commission addressed
the above regulatory discrepancies in various ways. Most importantly, the
Commission invites the European Supervisory Authorities to map the current
authorising and licensing approaches applicable for FinTech firms in
contemplation of creating a European Passporting Regime for these firms (by
analogy to the regime currently applicable to bank). It also aims to review the
suitability of the existing regulatory framework, including setting up an
expert group to identify regulatory obstacles for FinTech (call for applications is
open). Finally, the Commission will set up an EU FinTech Law where European and
national authorities will receive training and education on technology enabled
solutions.
While there is no doubt FinTech services and
products may be hugely beneficial for consumers, making their transactions
easier and enabling access to personalization of products and
services (see some benefits here),
FinTech carries a great deal of risk ranging from cybersecurity and data
protection risks to the potential of unsuitable transactional decisions
and the placement of dangerous products on the market. Although the Acton Plan
does intent to facilitate a high level of consumer protection, it does not take
into account the nature of consumer markets as such. As most European instruments,
this initiative is heavily focused on raising the competitiveness of the EU and
in providing choice for consumers. A systematic approach to consumer protection
is absent. From a consumer protection point of view, the approach of the
Action Plan is partial, addressing for example, the problems of informed
decisions on retail investors, and a danger from creating and
marketing harmful products in some forms of speculative investments
(crypto-assets).
Nevertheless, the initiative should be welcomed.
Technology enabled services and products are a reality that should be
addressed sooner rather than later. However, in reviewing the exiting
EU regulatory framework and in creating and EU regulatory/supervisory approach,
it is imperative to keep consumer interests and the true protection of
consumers at the forefront of the initiatives. To this effect, perhaps it
is time to conceptualize what is meant by a 'high level of consumer protection'
and to follow it up systematically in addressing the protection of consumers on
EU markets, including EU financial markets.
