Response to discussion on Approach on financial technology (Fintech)
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We believe that virtual currencies could be an opportunity. It may however pose some risks related to consumer protection. We are of the opinion that new payments solutions and virtual currencies should adhere to the same high safety and security requirements as incumbent payment providers. We call for a balanced approach and level playing field regarding (1) consumer protection, (2) transparency and (3) supervision and monitoring. Also we acknowledge that virtual currencies may bear greater threats than traditional currencies to financial stability and agree that this should be carefully monitored by central banks and regulators across Europe.
As DLT’s have no specific location, each node in the network may be subject to a different legal requirements. From a data protection perspective, the difficulty to locate DLT’s and the inherent nature of DLT’s as continuous secured data transfer will clash with data localization laws and other
barriers to the free flow of data.
DLT’s are immutable and are typically “append-only” systems, meaning that information cannot be deleted, only added. This creates challenges for smart contracts which may need to be adapted over time and a real issue for programmers needing to write perfect bug free code. In addition, data subject rights under the General Data Protection Regulation, such as the right to be forgotten", but also general opt-out rights related to consent under the Gramm-Leach-Bliley Act, the U.S. Fair Credit Reporting Act (and other laws globally) may pose technological challenges in view of the immutability of DLT’s."
We would also like to see more collaboration between regulators to ensure that a similar approach is taken when it comes to regulating the FinTech sector and that regulators take step to ensure a level playing field within the EU.
Mastercard also believes in interoperability between different solutions and solution providers. As outlined above, we have probably only seen the beginning of FinTech innovations and will have a range of different solutions existing simultaneously. We very much welcome this development but would also like to highlight the need for interoperability between solutions, both in Europe and globally. We believe regulators should encourage interoperability and not impose regulation which might pose restrictions on this between countries or regions.
We believe that the providers of financial products have an important responsibility to educate users such as consumers and merchants. Mastercard is engaged in financial education programs in Europe and globally. Within our corporate responsibility, Mastercard has created a free public education initiative called MasterYourCard that helps consumers, small business groups and governments get more from their money by using prepaid, debit and credit cards to their advantage. From assisting consumer and social advocacy groups to increase financial inclusion and financial literacy; to helping small business associations teach members how to negotiate the best terms for processing electronic payments, to providing information and technical assistance to governments transitioning to cost-effective electronic payments and disbursements, Master Your Card provides educational tools, case studies, practical advice and technical assistance.
Question 5: What opportunities and threats arising from FinTech do you foresee for payment institutions and electronic money institutions?
Mastercard believes it is essential that new technologies and innovations within the payments market also incorporate a high degree of safety which ensures that the consumer remains protected against for instance fraud or theft. Mastercard believes that it is important to closely monitor the market and investigate cases where there is a suspicion that consumer protection and safety are not being adhered to. Mastercard also believes that innovation in digital technologies and safety and security can and should go hand in hand.We believe that virtual currencies could be an opportunity. It may however pose some risks related to consumer protection. We are of the opinion that new payments solutions and virtual currencies should adhere to the same high safety and security requirements as incumbent payment providers. We call for a balanced approach and level playing field regarding (1) consumer protection, (2) transparency and (3) supervision and monitoring. Also we acknowledge that virtual currencies may bear greater threats than traditional currencies to financial stability and agree that this should be carefully monitored by central banks and regulators across Europe.
As DLT’s have no specific location, each node in the network may be subject to a different legal requirements. From a data protection perspective, the difficulty to locate DLT’s and the inherent nature of DLT’s as continuous secured data transfer will clash with data localization laws and other
barriers to the free flow of data.
DLT’s are immutable and are typically “append-only” systems, meaning that information cannot be deleted, only added. This creates challenges for smart contracts which may need to be adapted over time and a real issue for programmers needing to write perfect bug free code. In addition, data subject rights under the General Data Protection Regulation, such as the right to be forgotten", but also general opt-out rights related to consent under the Gramm-Leach-Bliley Act, the U.S. Fair Credit Reporting Act (and other laws globally) may pose technological challenges in view of the immutability of DLT’s."
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.
Mastercard believes that we are only seeing the start of innovation in the financial sector and therefore regulators should take a cautious approach to regulating new solutions. However, the absolute priority for Mastercard is the safety and security of the consumer and the payments systems; thus, we believe that regulators need to pay close attention to make sure that new solutions fulfill the necessary requirements regarding this. In that line, we do not believe that there is a need to set up a separate regulatory regime for certain FinTech companies as this may lead to competitive advantages and a less robust consumer protection and safety framework.We would also like to see more collaboration between regulators to ensure that a similar approach is taken when it comes to regulating the FinTech sector and that regulators take step to ensure a level playing field within the EU.
Mastercard also believes in interoperability between different solutions and solution providers. As outlined above, we have probably only seen the beginning of FinTech innovations and will have a range of different solutions existing simultaneously. We very much welcome this development but would also like to highlight the need for interoperability between solutions, both in Europe and globally. We believe regulators should encourage interoperability and not impose regulation which might pose restrictions on this between countries or regions.
Question 12: As a FinTech firm, have you experienced any regulatory obstacles from a consumer protection perspective that might prevent you from providing or enabling the provision of financial services cross-border?
As a global company, Mastercard is a firm supporter of free trade and free competition. However, we also believe that robust consumer protection frameworks should be in place and should apply equally to all providers. In addition, Mastercard believes in interoperability between different solutions and providers. Competition should be between market players, not countries.Question 18: Would you see the merit in having specific financial literacy programmes targeting consumers to enhance trust in digital services?
We are aware that innovation is not complete without education. We produce materials, host events and provide speakers to help people learn how to get the most from payment technology. At the same time we work very closely with consumer associations in order to address the burning issues and doubts that consumers might be facing while approaching financial digital services.We believe that the providers of financial products have an important responsibility to educate users such as consumers and merchants. Mastercard is engaged in financial education programs in Europe and globally. Within our corporate responsibility, Mastercard has created a free public education initiative called MasterYourCard that helps consumers, small business groups and governments get more from their money by using prepaid, debit and credit cards to their advantage. From assisting consumer and social advocacy groups to increase financial inclusion and financial literacy; to helping small business associations teach members how to negotiate the best terms for processing electronic payments, to providing information and technical assistance to governments transitioning to cost-effective electronic payments and disbursements, Master Your Card provides educational tools, case studies, practical advice and technical assistance.