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Fintech action plan to boost innovation in financial services

08 March 2018, 23:17 CET
Fintech action plan to boost innovation in financial services

Dombrovskis - Katainen - Photo © European Union 2018 Photo Thierry Monasse

(BRUSSELS) - Europe should become a global hub for FinTech innovation, the Commission said Thursday as it unveiled a plan to harness opportunities offered by technology-enabled innovation in financial services.

The first major deliverable of the plan to help EU businesses and investors make the most of the advantages offered by the Single Market in a fast-moving sector is a new set of new rules to help the growth of crowdfunding platforms.

The plan looks to enable the financial sector to make use of the rapid advances in new technologies, such as blockchain, artificial intelligence and cloud services.

At the same time, it seeks to make markets safer and easier to access for new players - with benefits for consumers, investors, banks and new market players.

In addition, the Commission is proposing a pan-European label for platforms, so that a platform licensed in one country can operate across the EU.

"An EU crowdfunding licence would help crowdfunding platforms scale up in Europe," said the EC's vice-president for financial services Valdis Dombrovskis: "It will help them match investors and companies from all over the EU, giving more opportunities for firms and entrepreneurs to pitch their ideas to a wider base of funders."

"Technologies like blockchain can be game changers for financial services and beyond," said Mariya Gabriel, Commissioner for the Digital Economy and Society: "We need to build an enabling framework to let innovation flourish, while managing risks and protecting consumers."

FinTech Action Plan:

The financial sector is the largest user of digital technologies and a major driver in the digital transformation of the economy. Today's Action Plan sets out 23 steps to enable innovative business models to scale up, support the uptake of new technologies, increase cybersecurity and the integrity of the financial system, including:

  • The Commission will host an EU FinTech Laboratory where European and national authorities will engage with tech providers in a neutral, non-commercial space;
  • The Commission has already created an EU Blockchain Observatory and Forum. It will report on the challenges and opportunities of crypto assets later in 2018 and is working on a comprehensive strategy on distributed ledger technology and blockchain addressing all sectors of the economy. A distributed ledger is an information database that is shared across a network. The best-known type of distributed ledger is blockchain.
  • The Commission will consult on how best to promote the digitisation of information published by listed companies in Europe, including by using innovative technologies to interconnect national databases. This will give investors far easier access to key information to inform their investment decisions.
  • The Commission will run workshops to improve information-sharing when it comes to cybersecurity;
  • The Commission will present a blueprint with best practices on regulatory sandboxes, based on guidance from European Supervisory Authorities. A regulatory sandbox is a framework set up by regulators that allows FinTech startups and other innovators to conduct live experiments in a controlled environment, under a regulator's supervision. Regulatory sandboxes are gaining popularity, mostly in developed financial markets.

Regulation on Crowdfunding:

Crowdfunding improves access to funding especially for start-ups and other small businesses. A start-up can present its project on an online platform and call for support in the form of a loan ('peer-to-peer lending') or equity. Investors receive a financial return for their investment. It is currently difficult for many platforms to expand into other EU countries. This is why crowdfunding in the EU is underdeveloped as compared to other major world economies, and the EU market is fragmented. One of the biggest hurdles is the lack of common rules across the EU. This considerably raises compliance and operational costs and prevents crowdfunding platforms from expanding across borders.

Today's proposal will make it easier for these platforms to offer their services EU-wide and improve access to this innovative form of finance for businesses in need of funding. Once adopted by the European Parliament and the Council, the proposed Regulation will allow platforms to apply for an EU label based on a single set of rules. This will enable them to offer their services across the EU. Investors on crowdfunding platforms will be protected by clear rules on information disclosures, rules on governance and risk management and a coherent approach to supervision.

Financial Technology (FinTech) Action Plan 
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European Crowdfunding Services for Business Regulation
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