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EBA identifies future work on fintech

The European Banking Authority (EBA) has identified six areas where regulatory bodies must respond to the growth in the use of financial technology (fintech) in the banking industry.08 Aug 2017

Fintech can be defined as "technologically enabled financial innovation that could result in new business models, applications, processes or products with an associated material effect on financial markets and institutions and the provision of financial services", the EBA said as it launched a consultation.

The Authority ran an EU-wide mapping exercise earlier this year to improve its understanding of current fintech activity in the region. It received responses from 22 member states and two European Economic Area states, with detailed information provided on 282 fintech firms. The results of that research, alongside work done by the EBA plus other intergovernmental and EU bodies, suggest there is merit in some follow-up work on a number of areas, the EBA said.

Fintech "has the potential to transform the provision of financial products and services" and the current growth of fintech may also alter the scope and objectives of regulatory and supervisory authorities as they adjust to market developments and may result in the revision of risk appetite, the Authority said.

In a discussion paper published this week, the EBA therefore proposes further work on: authorisation and sandboxing regimes; prudential risks for credit institutions, payment institutions and electronic money institutions; the impact of fintech on the business models of these institutions; consumer protection and retail conduct of business issues; the impact of fintech on the resolution of financial firms; and the impact of fintech on anti-money laundering and countering the financing of terrorism.

The discussion paper asks for views on these areas and any issues around them, on the EBA's work to date on these areas, and any possible gaps.

The consultation will close on 6 November.

Fintech legal expert Luke Scanlon said the consultation should lead to more consistency in how fintech businesses are treated across the EU.

"The consultation highlights that significant variations exist in the ways in which financial regulators within Europe treat fintech businesses, particularly in terms of determining whether they fall within the scope of regulation and this can create issues for businesses looking to expand rapidly across the region", he said.

"Bodies like the EBA within the European Union framework have the tools available to them to help businesses overcome these hurdles, whether through providing guidance or more formal regulatory technical standards for regulators to follow," Scanlon said.

"While no-one wants overly prescriptive rules, a principle-based approach to regulation which provides clarity and encourages consistency in how fintech businesses are treated in different places will lead to greater consumer trust in innovative financial services and products", he said. 

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