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Updated: October 2020
ESBG fully supports regulatory initiatives aimed at fostering the uptake of nascent technologies and business
models in Europe. ESBG encourages EU regulators to prioritise the following action points:
Support for codes of conduct for all market participants on applications of new technologies in the financial
Enhancing legal clarity through guidance at EU level for technologies and/or use cases
Strengthening of existing European standardisation and specifications initiatives (e.g. in payments or in API
Supporting further initiatives like the European Institute of Innovation and Technology partner network that
helps business and entrepreneurs be at the frontier of digital innovation by providing them with technology,
talent and growth support
Setting up and funding expert groups to define and implement nascent technology pilots.
Funding experimentation on certain applications of new technologies in finance at European level to
encourage the emergence of EU-wide businesses that would be able to compete with comparably sized
peers from other jurisdictions.
Cross-border coordination within the EU is fundamental to promote the scale-up of technological innovation
and to prevent an unlevel playing field and regulatory arbitrage. Fragmentation (e.g. differences in regulatory
requirement) is already limiting the potential of technological developments, which also affects the overall
competitiveness of the EU.
Establishing a framework for consent management to ensure that consumers have the correct tools to share
and control their personal data.
New technologies are transforming financial services and the way they are accessed by consumers; this digital transformation is shaping the future of banking. ESBG believes that it is difficult to encourage innovation through regulation and that digitalisation efforts need to be market-driven, where the right conditions are set to ensure that European companies can become global champions, meeting the highest requirements for consumer protection and financial stability.
At the same time, ESBG is supportive of technology-neutral legislation that creates a level playing field and
allows for offering digital services under sustainable business models that are beneficial to all stakeholders,
and that will hence stimulate the digital transition.
The main obstacles to fully reaping the opportunities of innovative technologies in the European financial
sector, as identified by ESBG, are the following:
Regulatory and supervisory fragmentation. To mitigate fragmentation, there is need for harmonisation of
the European regulatory and supervisory framework, particularly in the process of electronic identification.
In fact, the identification requirements of European consumers in digital channels differ vastly between
member states, especially due to the different interpretation, implementation and applications of, for instance,
AML-requirements and PSD2 by both legislators and supervisors. This has created a fragmented and
ineffective market environment across the EU. Something that hinders European citizens and
corporations. However, when harmonizing identification requirements, care must be taken not to weaken
money laundering and fraud prevention.
Unlevel playing field. Currently there are differences in legal requirements between established financial
institutions and new market entrants providing the same or similar services. The banking sector is
mandated to operate with specific requirements which other market players are able to bypass as they
avoid a banking licence – although they provide the same services. Significant risks are introduced in the
financial ecosystem by the ability of FinTech companies to operate in a grey area, performing activities that
need to be properly supervised. The principle of equal requirements for equal activities must apply.
The regulatory link between privacy, data protection, and innovation is not always optimally balanced:
the financial sector fully supports regulatory and supervisory authorities in relation to the approval and
implementation of rules on privacy and data protection. However, this should not restrict the industry
innovation capacity. The complex legal framework of consent management between PSD2 and GDPR
might constitute an obstacle. If public authorities aim at supporting innovation from companies that hold
(personal data of) thousands of clients, there needs to be a common ground on the terms of where
innovation can be undertaken.
The EU lags behind other jurisdictions in terms of capacity and competitiveness to innovate, scale up and compete with non-European players. European banks oftentimes face difficulties in accessing platforms and technical interfaces of BigTech companies, which are increasingly entering the financial sector.
To avoid giving a competitive advantage to non-EU companies, European regulators should
properly balance consumer interest when assessing the risks of both banks and BigTech
companies. Even though this also depends on financial and economic factors, ESBG believes
that a less rigid and time-consuming regulatory framework could help foster the
competitiveness of European firms globally.
In order to ensure a future-proof regulatory framework that does not hamper innovation,
consumer protection and financial stability, the general principle of “same activity and same
risks should comply same rules and supervision”, as well as the broad principle of technology
neutrality, need to be respected. The EU lags behind other jurisdictions in terms of capacity and competitiveness to innovate, scale up and compete with non-European players. European banks oftentimes face difficulties in accessing platforms and technical interfaces of BigTech companies, which are increasingly entering the financial sector.
Furthermore, Europe is currently facing an educational gap due to a lack of digital skills, both
in terms of consumer awareness and lack of qualified workforce; this might limit the
opportunities linked to harnessing the potential of technology. We strongly recommend
promoting the digital literacy of citizens. Important skills for dealing with and understanding
digitization and a consantly changing environment must be taught at school and beyond.
The financial sector has historically been subject to high regulatory and supervisory requirements. Such requirements have had an overall positive impact on society and have helped the financial sector show resilience in response to the recent COVID-19 crisis. The pandemic crisis has also triggered an increase in customer demand for digital financial services, making regulatory frameworks for digitalisation even more important.
ESBG submitted a response to the European Commission consultation on digital finance in June 2020, aimed at seeking views on the possible measures needed to further enable innovative digital financial services in the EU. On 24 September 2020, the European Commission adopted a Digital Finance Package, consisting of a Digital Finance Strategy, a Retail Payments Strategy, legislative proposals for an EU regulatory framework on crypto-assets, and proposals for an EU regulatory framework on digital operational resilience. Non-European BigTech companies can also penetrate the European market via massive investment policies, exploiting the weakness of European positions and the absence of a major European player. By becoming digital platforms where financial products and services are distributed, acquired, advertised, etc., BigTech companies can play a significant role in the intermediation of financial products and services, without having to comply with financial regulation and rules governing incumbent financial institutions. This situation creates an imbalance in the level-playing field necessary to guaranteeing the “same activity creating the same risks should be regulated in the same way” principle.
BigTech companies are already present in the market for multiple financial products and services (e.g. payments, provision of consumer and SMEs credit), and that presence is expected to continue growing. Customer data is at the heart of their business model:
Non-European BigTech companies can also penetrate the European market via massive investment policies, exploiting the weakness of European positions and the absence of a major European player. By becoming digital platforms where financial products and services are distributed, acquired, advertised, etc., BigTech companies can play a significant role in the intermediation of financial products and services, without having to comply with financial regulation and rules governing incumbent financial institutions. This situation creates an imbalance in the level-playing field necessary to guaranteeing the “same activity creating the same risks should be regulated in the same way” principle.