Europe has clearly got the memo that they need to think about sensible Fintech regulation.
The European Commission published a public consultation a few days ago, seeking views on the policy approach it should take - views sought by 15 June. I particularly enjoyed the Commission description of why Fintech is relevant now (although the whole paper is well worth a read):
"While technological innovation in finance is not new, investment in technology and the pace of innovation have increased significantly in recent years. Among other things, technological innovation is driving social networks, artificial intelligence, machine learning, mobile applications, distributed ledger technology (DLT), cloud computing and big data analytics. They give rise to new services and business models by established financial institutions, technology companies and new market entrants. FinTech involves the entire financial sector, including front, middle and back-office activities, as well as services for both retail and wholesale markets."
And on Monday, one of the members of the Executive Board of the European Central Bank (and Vice Chair of the Supervisory Board) gave a speech in which she identified that there have been some phenomenal changes in the past 4,000 years and that fintech may need to be included in that category.
The ECB identifies that the thing that supervisors worry about is risk. Specifically for these purposes, the ECB is worried about the risks to banks arising from fintech companies offering services.
The ECB noted that since banking will be affected by digitalisation, there are a few things which it is focussing on:
- the rising number of applications from fintech companies, particularly that applications are treated in the same way across the Eurozone;
- the ECB is seeking to implement a Eurozone hub for fintech companies;
- assessing the risks when banks or fintech companies outsource data or entire IT systems, following up on the ECB's 2015 cybercrime survey;
- exploring the potential risks that emanate from fintech companies and non-bank competitors - fintech companies are among the ECB's supervisory priorities.
Finishing with one of the ECB's own quotes - "Ladies and gentlemen, it is hard to predict where the fintech journey will take us. It is obvious, however, that the train has left the station and is speeding up."
As the President of IBM said in 1943: “I think there is a world market for maybe five computers.” He got it wrong, it seems. And so did Robert Metcalfe in 1995. As the founder of a tech company, he predicted that “the internet will soon go spectacularly supernova and in 1996 catastrophically collapse.”