For several decades, banking and insurance have undergone profound change due to technical innovations, regulatory requirements and changing customer needs and expectations. New investment, savings, insurance and money transfer models allow a wide variety of people to participate in projects of various sizes.
Financial technology companies (FinTech) and insurance technology (InsurTech) act as catalysts and often as partners of financial services institutions in modernizing their services by combining strengths and weaknesses and creating mutual synergies. In the EESC’s view, the promotion of an innovative ecosystem of the so-called coopetition offers considerable value-added potential.
In the financial sector, it is essential to restore confidence and stability, which is essential for managing the transition from the old (the traditional banking system) to the new system. In this regard, the EESC urges that appropriate legislation be introduced in the EU context of the Banking Union and Digital Single Market integration process, enabling growth and innovation while ensuring the protection of consumers and workers in the financial sector. In order to create a genuine single European financial market, the European Commission should pursue a policy of equal innovation. In general, largely analogous regulatory, consumer rights, working conditions and monitoring requirements are necessary for both the traditional financial sector and FinTech companies, according to the rule that equal activity requires equal regulation and supervision.
A risk-based regulatory approach should be consistent throughout the innovation cycle and should provide a proportionate and simplified regulatory framework for both incumbent and new entrants to experiment with new technologies and business models in interaction with regulators. The creation of an EU framework for testing in cooperation with wider industry stakeholders and stakeholders, including consumer and worker representatives, would strengthen the instruments for fostering innovation in all activities in this area (a kind of “sandbox” for FinTech). Innovation).
In order to align the conditions with those of third parties, the processing of software must be considered as an intangible asset in order to cope with the high level of IT investments made by EU-based legal entities (modeled on the banking system in the US and Switzerland or the insurance industry). , are not deducted from Common Equity Tier 1 capital.
The European Commission, the European Banking Authority and the Member States must make a firm commitment to the harmonized and effective implementation of the revised Payment Services Directive, which sets very stringent security requirements for the commissioning and processing of electronic payments, as well as for the technology sector, focusing on technology-based social media and industry heavyweights Protection of consumers’ financial data. The Financial Services Action Plan for Private Customers and the FinTech Task Force should carefully assess the challenges and risks associated with the digitization of financial services, ensuring close coordination between DG JUST and DG FISMA, in particular with regard to consumer protection issues, z. For example, what types of data should be used to assess creditworthiness and how to ensure understanding of pre-contractual information and effective screening through a screening process.
The measures contained in the proposed amendment to the Money Laundering Directive should be implemented without delay, in particular those addressing the risks of terrorist financing in connection with virtual currencies and the risks associated with anonymous prepaid services.
Crowdfunding and other sharing economy solutions should be strengthened by exploring ways to introduce a “quality label” in order to gain users’ trust to better develop virtual communities and facilitate interaction between cooperative clients.
The introduction of open source software solutions in the financial sector should be supported in order to strengthen healthy competition in the market, reduce costs and avoid supplier dependence in this sector.
At the same time, the rules for peer-to-peer lending need to be revised to encourage smaller balance sheets.
Hybrid loans (based on capital requirements of Basel III) should be supported by the European Commission.
To understand FinTech, all stakeholders need new competences: regulators, regulators, stakeholders in the financial ecosystem, and the population as a whole. To capitalize on one of FinTech’s biggest potential benefits as a driver of financial inclusion, EU Member States need to strengthen financial education and digital literacy in anticipation of the new reality. This should start with information on financial products, how they are being promoted online, and how they relate to the development of the Internet of Things at school.
Digitalization in the financial sector threatens many jobs, forcing workers to keep their skills and qualifications up to date. The EESC calls for two-tier education and training: internally, allowing workers to take on new responsibilities and to “cross-over” those currently employed in “traditional institutions” of the financial sector and FinTech and InsurTech companies, and externally, by preparing workers who can not stay in the industry for jobs in other industries.
Regulation and monitoring
The increasing complexity of financial products and the speed of data processing, together with anonymous, automated marketing, messaging and consulting services, lead to high risk situations that the owner of the invested or invested funds often can not assess or control. The EESC notes with concern that the risk models are inadequate and unsuitable for properly assessing the risk profiles of different types of unsecured investments.
In the view of the President of the French Central Bank, the digitization of the financial sector must be accompanied by regulation that is adaptable so as not to stifle innovation, and which continues to guarantee a high degree of transaction security and consumer protection. In this regard, the EESC believes that the same standards must be applied to the traditional financial sector as well as to the new fintech companies / business models.
The Second Financial Market Directive (MiFID II) is one of the key regulatory initiatives that will change market structure and business models. Companies should consider regulatory action as a strategic opportunity.
The new provisions on digital payments (PSD2) are designed to increase the level of security of online transactions in order to limit the number of fraud cases currently occurring.
The new EU Money Laundering Directive seeks to introduce new customer due diligence requirements, along with new obligations to report suspicious transactions and save payments.
The updated Consumer Protection Cooperation Framework (CPC Regulation) gives national authorities more powers to enforce consumer protection laws and improves the necessary coordination among Member States.
The implementation of Solvency II legislation for insurance companies and the measures taken by banks under Basel III / CRD IV raises the question of how a complementary regulatory approach addresses the risks facing new players in the financial sector and their implications account for this industry as a whole.
Following the stress tests carried out by the European Banking Authority in 2016, the Commission is now presenting
proposals that reflect the current debate in the Basel Committee on stricter capital requirements. The introduced universal standards should be proportionate depending on the size and type of credit institutions and financial start-ups. The EESC welcomes the Commission’s latest package of proposals.
As a result of the financial crisis, direct investment funds, notably shadow banks, have done well in recent years. The impact of digitization on the activity of such funds should not lead to regulatory gaps that could jeopardize the stability of the financial sector.