Response to discussion on Approach on financial technology (Fintech)
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The SAG acknowledges that there are occasions when the application of bespoke, jurisdiction based standards is appropriate. However, FinTech is not typically jurisdiction specific and can generally be considered a global or trans-border ‘industry’. Therefore, we would only advocate jurisdiction based standards when considerations for using global standards have been exhausted or are not conducive to an appropriate outcome. Jurisdiction based, thus more regional based standards, might also be less productive by a reduced economies of scale. They may even in some cases contradict a global standard as they require specific, jurisdiction set up and maintenance. This can become problematic, especially when it does not guarantee interoperability between jurisdictions. In the context of the FinTech industry, the EBA should look at promoting and in some cases mandating the adoption of global standards before considering jurisdiction based standards. We see this benefiting the objectives of the European Commission and the FinTech Industry for two reasons:
- Firstly, FinTech is global in nature and therefore the use of standards to support competition, manage risk and promote interoperability should be considered from a global perspective. By its very nature, FinTech often includes products and services that are not jurisdiction-specific – such as data processing, cross-border payments, settlement reconciliation. It would therefore almost always be counterproductive to seek to move towards anything other than global standards.
- Secondly, the ISO model is the most appropriate governance to achieve the consultation paper’s objective: ‘For standardisation to be competition-friendly, participation in standard-setting must be unrestricted, procedures for adoption of standards must be transparent and access to standards must be granted on fair, reasonable and non-discriminatory terms in order to prevent foreclosure of new entrants.’ This is already demonstrated by the increased global usage of ISO standards by financial institutions, regulators and FinTech providers.
In response to the second part of the question, we note here that the ISO process for developing and maintaining standards means that it is able to address issues of data standardisation and interoperability. In other words it is flexible and adaptable, allowing it to address ‘obstacles’ in the level of data standardisation and interoperability as they arise. We believe that ISO’s inclusive and transparent governance process to developing standards provides for this as the most globally oriented, effective and competition friendly approach.
As the EBA recognises in this consultation, both incumbent financial institutions and new FinTech providers will be challenged by technical change. It is worth noting that, regardless of whether outdated legacy systems are being upgraded or new systems are being installed, common standards are required. Without the ability to monitor activity and assess risk across the system, regulators will not be able to mitigate risks if they are not able to make sense of the data. This is why standards that bring both FinTech and incumbent providers together are essential. ISO has recognised this and created a FinTech advisory group to keep it on the forefront of the standards agenda.
Furthermore, increasingly we are seeing convergence and synergies between industries – beyond financial services. ISO develops standards across industries and the TC68 has appropriate liaisons and links across industries to support the objectives of mutual and common standards.
This response is submitted by the ISO Technical Committee 68 Financial Services (TC68). It has been compiled by the Standards Advisory Group (SAG), with input from experts in the TC/68 FinTech Technical Advisory Group.
It does not represent the views of other committees within ISO, including the Technical Committee 307 (Blockchain and Distributed Ledger Technologies).
ISO is an independent, non-governmental international organisation with a membership of 163 national standards bodies. Through its members, it brings together experts to share knowledge and develop voluntary, consensus-based, market relevant International Standards that support innovation and provide solutions to global challenges.
ISO/TC 68 is the Technical Committee within ISO tasked with developing and maintaining international standards covering the areas of banking, securities, and other financial services.
The SAG, as a subgroup of ISO/TC 68, acts as an advisory sounding board to support and engage with regulators on financial services standards requirements, for the effective and efficient use and development of financial services standards, delivered using a cooperative relationship approach. The SAG enables a proactive dialogue with regulators on financial services standards matters.
The SAG’s objectives are:
• Provide a forum for mutual assistance between the global regulatory community and ISO in carrying out their respective authorities and responsibilities with respect to financial services standards;
• Aid the adoption and promotion of consistent standards, where possible;
• Effectively deal with common issues collectively and consistently; and
• Encourage strong and open communication within the regulatory community and with the industry concerning financial services standards.
The SAG’s response represents a collective view of its membership and draws upon its knowledge as an advisory group to TC/68.
Question 1: Are the issues identified by the EBA and the way forward proposed in section 4.1 relevant and complete? If not, please explain why.
The ISO TC68 Standards Advisory Group (SAG) welcomes the discussion paper and would like to highlight the role of standards in all the issues identified by the EBA. Ahead of the detail in our response, we note upfront that the ISO standards development process is open and transparent and that, in this vein, we welcome an open dialogue with the EBA on this topic. We are broadly supportive of the issues identified in section 4.1 as relevant, however for completeness we wish to highlight some points around standards and, in particular, international standards as we believe these will support the goals of the EBA.The SAG acknowledges that there are occasions when the application of bespoke, jurisdiction based standards is appropriate. However, FinTech is not typically jurisdiction specific and can generally be considered a global or trans-border ‘industry’. Therefore, we would only advocate jurisdiction based standards when considerations for using global standards have been exhausted or are not conducive to an appropriate outcome. Jurisdiction based, thus more regional based standards, might also be less productive by a reduced economies of scale. They may even in some cases contradict a global standard as they require specific, jurisdiction set up and maintenance. This can become problematic, especially when it does not guarantee interoperability between jurisdictions. In the context of the FinTech industry, the EBA should look at promoting and in some cases mandating the adoption of global standards before considering jurisdiction based standards. We see this benefiting the objectives of the European Commission and the FinTech Industry for two reasons:
- Firstly, FinTech is global in nature and therefore the use of standards to support competition, manage risk and promote interoperability should be considered from a global perspective. By its very nature, FinTech often includes products and services that are not jurisdiction-specific – such as data processing, cross-border payments, settlement reconciliation. It would therefore almost always be counterproductive to seek to move towards anything other than global standards.
- Secondly, the ISO model is the most appropriate governance to achieve the consultation paper’s objective: ‘For standardisation to be competition-friendly, participation in standard-setting must be unrestricted, procedures for adoption of standards must be transparent and access to standards must be granted on fair, reasonable and non-discriminatory terms in order to prevent foreclosure of new entrants.’ This is already demonstrated by the increased global usage of ISO standards by financial institutions, regulators and FinTech providers.
In response to the second part of the question, we note here that the ISO process for developing and maintaining standards means that it is able to address issues of data standardisation and interoperability. In other words it is flexible and adaptable, allowing it to address ‘obstacles’ in the level of data standardisation and interoperability as they arise. We believe that ISO’s inclusive and transparent governance process to developing standards provides for this as the most globally oriented, effective and competition friendly approach.
As the EBA recognises in this consultation, both incumbent financial institutions and new FinTech providers will be challenged by technical change. It is worth noting that, regardless of whether outdated legacy systems are being upgraded or new systems are being installed, common standards are required. Without the ability to monitor activity and assess risk across the system, regulators will not be able to mitigate risks if they are not able to make sense of the data. This is why standards that bring both FinTech and incumbent providers together are essential. ISO has recognised this and created a FinTech advisory group to keep it on the forefront of the standards agenda.
Furthermore, increasingly we are seeing convergence and synergies between industries – beyond financial services. ISO develops standards across industries and the TC68 has appropriate liaisons and links across industries to support the objectives of mutual and common standards.
This response is submitted by the ISO Technical Committee 68 Financial Services (TC68). It has been compiled by the Standards Advisory Group (SAG), with input from experts in the TC/68 FinTech Technical Advisory Group.
It does not represent the views of other committees within ISO, including the Technical Committee 307 (Blockchain and Distributed Ledger Technologies).
ISO is an independent, non-governmental international organisation with a membership of 163 national standards bodies. Through its members, it brings together experts to share knowledge and develop voluntary, consensus-based, market relevant International Standards that support innovation and provide solutions to global challenges.
ISO/TC 68 is the Technical Committee within ISO tasked with developing and maintaining international standards covering the areas of banking, securities, and other financial services.
The SAG, as a subgroup of ISO/TC 68, acts as an advisory sounding board to support and engage with regulators on financial services standards requirements, for the effective and efficient use and development of financial services standards, delivered using a cooperative relationship approach. The SAG enables a proactive dialogue with regulators on financial services standards matters.
The SAG’s objectives are:
• Provide a forum for mutual assistance between the global regulatory community and ISO in carrying out their respective authorities and responsibilities with respect to financial services standards;
• Aid the adoption and promotion of consistent standards, where possible;
• Effectively deal with common issues collectively and consistently; and
• Encourage strong and open communication within the regulatory community and with the industry concerning financial services standards.
The SAG’s response represents a collective view of its membership and draws upon its knowledge as an advisory group to TC/68.