“Europe is certainly well placed for new Fintechs emerging, both in terms of the necessary skills, financing for innovation, availability of capital … Everything is there for Europe to be a great place to start Fintechs … [But] too many barriers [prevent companies from growing] … We still don’t have this digital single market . . . and that’s why we see many European Fintechs then going to the US or Asia to scale up.”
— Valdis Dombrovskis (@VDombrovskis) December 28, 2017
The UK remains the dominant global Fintech hub. This is due largely to a regulatory approach that has encouraged experimentation and innovation, backed by a vocally supportive government, and a population with a keen entrepreneurial spirit. Brexit has put their Fintech prominence at risk.
Of course, continental Europe sees an opportunity in fostering a more entrepreneurial ecosystem in the alternative financial sector. The question is, can Brussels actually create a single European license for Fintechs?
The EU sets out the Fintech challenge and mission as follows:
“Fintech” is at the confluence of various digital technologies, financial areas and the entrepreneurial landscape, with many startups and scale-ups proposing disrupting services. The challenge is to increase the role Europe play in Fintech so that EU startups can better scale-up across Europe and at global level. Facilitating the interactions between innovators, supervisors and regulators is particularly relevant in this context.
- Bring together a group of regulatory or supervisory bodies, and other relevant organisations to investigate new approaches for piloting innovative Fintech solutions, anticipating risks, and facilitating the operations of Fintech firms that want to grow and scale-up across Europe.
- Build capacity and expertise regarding new technologies and models to support early understanding for regulators or supervisors and to offer specific advice to Fintech firms that want to grow and scale-up across Europe. Such regulatory advice would be provided by pools of experts. It should in particular support common understanding and interpretation of data-related policies and rules.
- Support the cross-border networking of ecosystems, hubs and accelerators focusing on Fintech, in particular to help startups appraise regulatory issues, to engage with other stakeholders like established financial or insurance firms and to identify opportunities for innovation procurements in Fintech.
- Envisage possible actions and technical solutions to evaluate the impact of regulation and facilitate regulatory compliance in financial areas. This could concern in particular initiatives based on distributed ledger technologies, advanced regtech solutions or algorithmic regulation.
- Reinforce the position of Europe amongst leaders in Fintech, encouraging cross border collaboration and practical approaches for Fintech experimentation frameworks; enabling Fintech firms to grow and scale-up across Europe.
- Develop common understanding, interpretation and expertise regarding technology evolution and Fintech-related regulations and policies, in particular those concerning data.
- Put Europe in the lead for innovating in regulation, appraising the impact of regulation and facilitating regulatory compliance.
Easier Said than Done?
The goal is to allow marketplaces, including investment crowdfunding, and other Fintech services to set up shop in one country and operate everywhere across Europe. The reality today is quite different though. Each country tends to have a bespoke regulatory regime championed by national regulators without regard to continental needs. In fact, creating a pan-European Fintech license may be viewed as a litmus test for CMU in general. The demand is clear, the goal is known, the impact is good for all. So what is the problem? Just get it done.
While Brussels attempts to create a cross border ecosystem that truly allows streamlined, low friction pass-porting of Fintech services, the UK will obviously work quite hard to maintain its Fintech crown. The EU expects to have effective cross border Fintech rules in place by next year.
In the end, words count but actions speak louder. Let’s wait and see what the Commission comes up with.
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