The European Parliament is making moves towards introducing regulation for the fintech sector. The parliament’s powerful Econ (economic and monetary affairs committee) has decided to begin a process which will result in it proposing policy for new regulations for the sector before the end of the year.
The committee has already taken a position on virtual currencies and in May called for a taskforce led by the Commission to foster understanding of emerging innovations and to focus on developing a proportionate regulatory response.
A process has now been set in motion which is likely to result in regulation proposals to be presented to the Commission before the end of the year. The first stage has seen the committee request each of the political groupings in the parliament to nominate rapporteurs who will form a working group to develop a report for approval by the committee and later by the parliament.
Irish MEP Brian Hayes was selected to represent his grouping, the European People’s Party (EPP). This is an important development as it means that in the post-Brexit era Ireland will have a voice in the regulation of this key sector, while our nearest neighbour and most keen competitor will not.
Pushes this agenda
Hayes says: “We need to be prepared for what comes out of the EU in terms of regulation. We want to ensure that financial services are provided to customers in a simple and effective manner and if fintech pushes this agenda forward, then we as legislators need to pave the way for its development.”
Deloitte head of financial services David Dalton believes this could represent a positive development for the sector. “It could be good in the sense that the committee will be able to explore different regulatory practices across different countries. This would help bring about a more consistent approach to the sector across the EU and this would certainly be welcome as it would help level the playing field somewhat.”
According to Dalton the focus of the committee will likely be on data rather than the financial aspects. “Most of the fintech companies we encounter are already subject to financial regulation,” he says. “The focus will probably be on data and bringing consistency to treatment of customer data and security issues around it will also be welcome.”
He also hopes the committee might take a leaf from the UK regulator’s book. “The FCA [Financial Conduct Authority] has a mandate to encourage competition and sees disruption by fintech firms as a means of stimulating it. The FCA has been very engaged with the sector as a result and it would be very interesting if the European parliament committee took the same approach.”
KPMG tax partner Anna Scally says regulation must be balanced to ensure innovation is not stifled. “While the challenge for policy makers is to provide appropriate levels of regulation to protect consumers and ensure financial stability, we must carefully balance this against the need to continue to develop innovative solutions that promote competition and choice in the market.”