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Regulation and FinTech: you have to put the high beams on

"The work that various national regulators are doing to understand and welcome the new and diverse FinTech into regulation is an open secret"
Henry Titos Strategic advisor, consultant and investor in digital projects. Former head of Barclays Europe in Capital Markets, Insurance and Pensions Member of the Academic Council of Fide

The succession of national, regional or global regulators interested in understanding FinTech begins to be almost as exponential as the very nature of technological change. The MFI with Lagarde At the forefront, he sees the potential disruption that, for example, virtual currencies, disintermediation platforms or artificial intelligence can generate in the world of finance as we know it, more and more. Mark Carney, Governor of the Bank of England and Chairman of the FSB is another growing party convinced of the irreversibility of the movement.

The work that several national regulators are doing to understand and welcome the new and diverse FinTech into the regulation is an open secret, many in the process of frequent mutation in the search for a sustainable business model and several of them applying to obtain banking license like the swedish Klarna or the British Zopa.

While this is happening, the ESAs (European Supervisory Agencies) ESMA and EBA published last August 4 a public consultation related to the best way to register, know and eventually regulate the FinTech universe in the EU. Part of the issues are related to the very essence of knowledge and talent management.

  • The sandboxes Regulatory should be national or transnational focused on hubs financial or could both coexist and under what criteria could FinTechs or banks with a FinTech model choose one or the other alternative?
  • Should they be monitored centrally or locally? Could FinTechs that do not aspire to a banking license be supervised at the national level or will supervision be centralized in the EU?

The cross-border nature of FinTech models means that the main barriers are regulation, product habits and the financial culture of each country, along with trust and branding. If Amazon wanted to lend via crowdlending for European SMEs and the legislation was uniform in the EU in less than 12 months it would probably be the largest SME bank in Europe, with the permission of the competition authorities. The ESAs and the Commission know this and there should be great urgency to accelerate the construction of the Single Capital Market and encourage the creation of competitive European champions, even if it means laying a silver bridge for the big technology companies that operate today cross border in electronic commerce. To do the opposite is to go against progress.

The ECB has just published on September 21 another consultation paper to assess the rules for granting a general banking license to new “conventional” applicants or those requesting a banking license using pure FinTech models. I recognize that it is increasingly difficult for me to contemplate the “no Fintech” in the strategy of the incumbent intermediaries. I believe that more and more all banks (those that survive) will be FinTech, and the FinTech that survive will be either banks, or enablers of processes or products connected with existing banks or with large technologies in a White brand, as it happens with the thousands of developers who contribute to the ecosystems of the Google, Amazon, Facebook, or Apple of the world. The great battle will be played in Europe, because the North American market is dominated by its great technologies, with Wall Street and Silicon Valley among others hubs. Asia is an oligopoly with the Chinese giants (Alibaba, Tencent, Baidu) controlling its market and trying to expand to Southeast Asia and India. The emerging markets of LATAM and Africa will enter the XNUMXst century of technology without having to go through the already obsolete structures from which we have to migrate in Europe.

I have a feeling that in this context time is not unlimited and we will see more pressure to accelerate the construction of a less fragmented European financial services market, with European institutions playing a more centralizing role with fewer directives and more regulations.

Henry Titos Strategic advisor, consultant and investor in digital projects. Former head of Barclays Europe in Capital Markets, Insurance and Pensions Member of the Academic Council of Fide

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About the Blog

Blog Tribute Antonio Moreno

Blog Tribute Antonio Moreno

Blog tribute to Antonio Moreno Espejo, who was Director of Authorizations and Registrations, National Securities Market Commission (CNMV), co-director of the Financial Markets Forum of Fide and Member of the Academic Council of FIDE. This collective blog contains articles and reflections generated by people who regularly participate in the Financial Markets Forum of Fide.

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