Fintech can enhance EU capital markets, says Commission.

In a report on how to accelerate reform of the EU's capital markets union the Commission said that "fintech firms succeed by providing new services that meet consumers' needs better in many financial fields including payments and lending. Technology is a driver of competition and helps to create a more diverse financial landscape".

At the same time, it said, "the rapid development of fintech poses new challenges in managing risks and ensuring consumers have adequate information and safeguards".

Regulatory authorities in some member states have begun to develop hubs providing regulatory guidance for fintech businesses as well as teams focused on the policy implications, the Commission said.

The regulatory environment must strike a balance between "building confidence in companies and investors, protecting consumers and providing the fintech industry the space to develop", the Commission said.

The Commission will work with the European Supervisory Authorities, the European Central Bank, other standard setting bodies, and member states to develop a coordinated policy approach that supports the development of technology in an "appropriate regulatory environment", it said.

Financial technology expert Luke Scanlon of Pinsent Masons, the law firm behind Out-Law.com said: "There is obviously an opportunity for the Commission to listen carefully to the fintech community and understand the regulatory issues that are holding back greater adoption of innovative solutions."

"Beyond payments and lending in a broad sense as the Commission identifies in this paper, there are so many specific questions that need to be answered around the EU regulatory framework and the legal definitions it imposes on capital markets. Answering each of these questions in a co-ordinated manner will make it easier for many in the financial world to move forward with innovation," he said.

The UK's Financial Conduct Authority set up a 'regulatory sandbox' in May to allow companies to test innovative products, services, business models and mechanisms of delivery under a light-touch regulatory framework.

A global initiative launched last month aims to create closer ties between different financial technology hubs around the world. The Global FinTech Hubs Federation (GFHF) is made up of more than 20 members, including the City of London, China Fintech, Fintech Australia, Frankfurt Main Finance and Fintech HK.

GFHF was set up by London-based financial technology industry trade body Innovate Finance and SWIFT Innotribe, a subsidiary of global financial network SWIFT which promotes innovation and collaboration in financial technology.