Response to discussion on Approach on financial technology (Fintech)
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In case of doubt, the activity should be checked against what the consumer thinks he/she is getting as a service.
With regard to question 1, on authorisation and sandboxing, BIPAR believes it is very important, both for consumer protection reasons and for reasons of fair competition, to have a level playing field between “new players” and “existing players”.
New players should not be subject to lighter authorisation regimes. BIPAR does not agree with EBA’s statement on p 34, point 72.b that “there could be legitimate reasons for some FinTech firms not being subject to (financial) regulation and supervision”.
As already stated in our response to the European Commission’s consultation on FinTech, we do not believe that there should be a separate licensing system/passporting system for FinTech. The EU should solve existing issues (see below on cross border activity) for all distributors, “established intermediaries” and “pure FinTech actors”. Why leave the established intermediary with unresolved issues regarding their cross-border activities and resolve the Fintech issues as soon as possible with new licensing categories for Fintech?
With regard to sandboxes, we believe that these concepts can be useful but consumer protection and a level playing field with regard to access to sandboxes have to be guaranteed. Access to sandboxes has to be guaranteed for all innovative firms. Existing players wishing to develop new ideas should have the same access to sandboxes as new (potentially non-regulated) players. All intermediaries should have access to “sandboxes”, in particular against the background of a wave of new rules which have recently come or will come into force in the coming year (MiFID II, IDD, Solvency II, Data Protection, Cyber security, Anti Money Laundering, ….).
BIPAR has repeatedly criticized the lack of clarity regarding the triggering element for freedom of services and freedom of establishment both under the IDD and under the MCD.
Looking at the proposed way forward on p 46 of the discussion paper, BIPAR believes that with regard to point a. – and as stated by BIPAR during the drafting of the Guidelines by EBA – the current MCD rules are not sufficiently clear. However, there is need for clarification for all players instead of having amended rules /guidelines for FinTech firms-alone.
With regard to action point b. “If equivalent regulation needs to be extended to non-regulated FinTech firms in order to address cross-border issues”, BIPAR believes that regulation should apply on a level-playing field basis to all firms and there should not be unregulated FinTech firms.
BIPAR supports point 119 e. which states that: “Regulators have to evaluate how information should be given to consumers through digital channels and supervisors have to ensure compliance with the legal and regulatory framework irrespective of the service provider and/or the channel used.”
With regard to the way question 18 is phrased, we have the following comment: over the past months and years, BIPAR regretted that European regulators in many of their communications are still referring to more regulation being necessary to “restore” confidence, lack of confidence and other negative messages. We suggested that European regulators and supervisory authorities start sending a positive message to the public confirming that the financial and insurance markets – thanks to all the new European rules - are now safer than ever before from a consumer protection perspective. The question 18 seems to indicate a more positive approach, but is unfortunately limited to digital services only… The question thus seems to imply that mostly (if not only) digital solutions could strengthen consumer trust, denying the role of “traditional” intermediaries and market players in this context.
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.
As an introductory statement, we wish to point out that in our sector, many thousands of mainly smaller firms and their hundreds of thousands of local employees interact daily with millions of consumers. For years, these intermediaries have harnessed technology to optimise the speed, fluidity, efficiency and traceability of the transactions. They comply with a series of regulations which protect the consumers and act in competition with financial institutions which are often defined as “FinTechs”. On the other hand, many of these “FinTechs” are evolving towards more “traditional” models. The system is therefore “Hybrid” and this requires an “activity-based” approach to regulation. The level playing field has to be guaranteed.In case of doubt, the activity should be checked against what the consumer thinks he/she is getting as a service.
With regard to question 1, on authorisation and sandboxing, BIPAR believes it is very important, both for consumer protection reasons and for reasons of fair competition, to have a level playing field between “new players” and “existing players”.
New players should not be subject to lighter authorisation regimes. BIPAR does not agree with EBA’s statement on p 34, point 72.b that “there could be legitimate reasons for some FinTech firms not being subject to (financial) regulation and supervision”.
As already stated in our response to the European Commission’s consultation on FinTech, we do not believe that there should be a separate licensing system/passporting system for FinTech. The EU should solve existing issues (see below on cross border activity) for all distributors, “established intermediaries” and “pure FinTech actors”. Why leave the established intermediary with unresolved issues regarding their cross-border activities and resolve the Fintech issues as soon as possible with new licensing categories for Fintech?
With regard to sandboxes, we believe that these concepts can be useful but consumer protection and a level playing field with regard to access to sandboxes have to be guaranteed. Access to sandboxes has to be guaranteed for all innovative firms. Existing players wishing to develop new ideas should have the same access to sandboxes as new (potentially non-regulated) players. All intermediaries should have access to “sandboxes”, in particular against the background of a wave of new rules which have recently come or will come into force in the coming year (MiFID II, IDD, Solvency II, Data Protection, Cyber security, Anti Money Laundering, ….).
Question 10: Are the issues identified by the EBA and the way forward proposed in subsection 4.4.1 relevant and complete? If not, please explain why.
As stated above, we believe that the level playing field should be applied for consumer protection reasons and for reasons of fair competition. Regulation and registration should apply on the basis of the activity carried out.Question 11: Are the issues identified by the EBA and the way forward proposed in subsection 4.4.2 relevant and complete? If not, please explain why.
We would like to point out that uncertainty about which Member State’s regime applies in the case of cross-border (internet) service provision, is not a new issue.BIPAR has repeatedly criticized the lack of clarity regarding the triggering element for freedom of services and freedom of establishment both under the IDD and under the MCD.
Looking at the proposed way forward on p 46 of the discussion paper, BIPAR believes that with regard to point a. – and as stated by BIPAR during the drafting of the Guidelines by EBA – the current MCD rules are not sufficiently clear. However, there is need for clarification for all players instead of having amended rules /guidelines for FinTech firms-alone.
With regard to action point b. “If equivalent regulation needs to be extended to non-regulated FinTech firms in order to address cross-border issues”, BIPAR believes that regulation should apply on a level-playing field basis to all firms and there should not be unregulated FinTech firms.
Question 14: Are the issues identified by the EBA and the way forward proposed in subsection 4.4.3 relevant and complete? If not, please explain why.
BIPAR wishes to point out that for regulated entities rules exist already as well as additional guidance on complaints handling which are very far reaching. We stress once again also with regard to this aspect of regulation, the need for a level playing field and an activity-based approach.Question 15: Are the issues identified by the EBA and the way forward proposed in subsection 4.4.4 relevant and complete? If not, please explain why.
The point that some existing legal requirements “may be outdated following developments in digitalisation” (point 119 a.) is a fact. We believe that it would be useful to have a general solution to ensure that in all legal texts where paper is still referred to as default carrier of information, (all) market participants can make use of a safe digital alternative as well.BIPAR supports point 119 e. which states that: “Regulators have to evaluate how information should be given to consumers through digital channels and supervisors have to ensure compliance with the legal and regulatory framework irrespective of the service provider and/or the channel used.”
Question 18: Would you see the merit in having specific financial literacy programmes targeting consumers to enhance trust in digital services?
BIPAR promotes financial literacy in general. Taking into account the new risks that may come with the use of digital services, it may be useful to include this aspect in financial literacy initiatives.With regard to the way question 18 is phrased, we have the following comment: over the past months and years, BIPAR regretted that European regulators in many of their communications are still referring to more regulation being necessary to “restore” confidence, lack of confidence and other negative messages. We suggested that European regulators and supervisory authorities start sending a positive message to the public confirming that the financial and insurance markets – thanks to all the new European rules - are now safer than ever before from a consumer protection perspective. The question 18 seems to indicate a more positive approach, but is unfortunately limited to digital services only… The question thus seems to imply that mostly (if not only) digital solutions could strengthen consumer trust, denying the role of “traditional” intermediaries and market players in this context.