How can regulation let financial innovation flourish? It was to discuss this question and more that the banking industry, experts and representatives of the European institutions met on Thursday 28 September for a 'banking summit' hosted by the European Banking Federation (EBF) in Brussels.
Calling on the European Union to be more ambitious on financial technologies ('FinTech'), Cora van Nieuwenhuizen (ALDE, Netherlands) said that Europe was the “sick man of the FinTech world”, observing that most technological investments are directed to the United States and the only ones that reach Europe are concentrated in the United Kingdom, which is soon to leave the EU.
Speaking on behalf of the European Commission, the Director General for Financial Services, Olivier Guersent, reiterated the European institution's intention of regulating this new phenomenon, but “flexibly”. What is needed is not a single approach but a granular strategy that allows European banks to seize the opportunities offered by FinTech, he added. He also said that the Commission would propose a roadmap in early 2018.
However, regulation alone will not be enough, the participants warned, but it must be accompanied by a change of mindset in the financial operators. We need to think “out of the box”, van Nieuwenhuizen said. Richard Peers, Director, Financial Services Industry at Microsoft, said that the 'payment services' directive (PSD2) has already allowed market operators to open up to new technologies.
The banking industry is facing new competition, David Dechamps, Senior Vice-President, Digital Payments at MasterCard Europe said, and banks must learn to evolve in this new space. Using the example of contactless payment, he said that he had seen enormous resistance when the idea was launched five years earlier, yet today, contactless payments account for more than 30% of card transactions in Europe. This, he stressed, shows that consumers' needs make a good starting point to move forward in this area.
Lior Borhshtain, who was presenting his app, Otly!, highlighted the importance of financial education. He explained that his banking app, which is aimed at children and controlled by their parents, allows children to learn the value of digital currency and saving from an early age.
A further challenge to the banking sector: 'sustainable' finance
Alongside this event, the EBF published a report evaluating the role the banking sector has to play in promoting finance that does more to take the criteria of environmental sustainability into account.
In particular, the report recommends: - harmonising the long-term development of sustainable finance with political objectives; - setting in place a classification system for environmental and climate risks in the EU by economic sector; - introducing incentives, in the form of tax breaks, for instance; - taking monetary policy measures, such as allowing certain 'green' assets to be used to guarantee central bank loans, and; - standardising risk analysis.
However, the report considers that although it is determined to make progress in this area, the banking industry cannot be the driving force behind it. Sirpa Pietikäinen (EPP, Finland) said that the banking industry and regulators must work hand in hand and in particular, the industry must support the creation of a legal framework. “If you get mixed messages, it's hard to work”, she explained. Antoni Ballabriga, representing the Spanish bank BBVA, stressed the need to avoid overregulating the sector. “If things happen voluntarily, they are usually better”, he said. (Original version in French by Marion Fontana)