The pandemic affected almost every aspect of our daily life: restrictive measures rolled out to contrast the Covid 19 have changed the way we communicate to each other and to work too. The technology has made it possible keeping up with our previous habits. Indeed the pandemic has accelerated the process of digitization already underway in many economic and productive sectors; concerns arise in the lack of regulation implemented throughout this process.
FinTech expresses the main example of the lagging regulation in such matters. It represents the union of the two terms “Financial” and “technology” and it is really difficult to draw an accurate definition. Perhaps, as for the most is accepted, it could be defined as “technologically enabled innovation in financial services that could result in new business models, applications, processes or products with an associated material effect on financial markets and institutions and the provision of financial services.”. This is a broad definition that encompasses a large set of financial services underpinned by the technology: peer-to-peer landing, crowdfunding, instant payments and even the more fascinating cryptocurrency.
Nowadays, in the midst of this pandemic, the utilization of financial and banking apps is stepping up, especially among Z and Y generations, and it is thought to stay: everyday we are making payments through smartphone, checking out our bank account through online banking up or even take out a mortgage through a digital platform or we already have in our digital wallet a bitcoin, the most popular cryptocurrency.
Such a move to the digital in the matter of payments and online banking has gained so far a close attention from institutional investors to the evolution in financial sectors: those actors already have increased their investment in renewing part of their business model.
The growth of digital payments, thus, and the declining use of cash have prompted central banks around the globe to experiment with digital versions of cash, the so-called digital currencies (CBDCs).
Nevertheless a technological divide is still affecting the oldest generations and this concern arises especially in this pandemic. The broader adoption of technology in ways that were unusual before, has required, first of all, a mindset change before than the operational one.
Further concerns are stemming from the entrance into financial services providing from the Big Tech, the already worldwide big actors in the digital sector, exploiting their leverage on the data flow coming from their broad userbase posing a serious threat on the guaranties set by financial intermediaries already existing, the incumbent ones, especially in emerging and developing markets.
The potential of this pivotal shift could bring many advantages as well as many concerns: fintech could increase financial inclusion, create new and more suitable business models in financial sector, but also could pose relevant concerns over customers privacy and fair competition.
Regulators are coming to tackle those issues.
As noted by EU Authorities “in the face of this and the challenges brought by big techs, Europe needs a strategic vision to ensure that consumers and companies fully reap the benefits of an integrated market, offering secure, fast, convenient, accessible and affordable payment services”.
The European Commission, in such an effort to to reduce the regulatory gaps between the EU member states laying the ground to create the long awaited and wished Capital Market Union, already published in May 2018 Action Plan for FinTech: this document represents a milestone of FinTech development and gives the strongest indication to be followed that technological innovation and disruption will be among the main drivers of the EU’s future agenda.
The measures exposed aimed to understand the current national approaches to FinTech licensing, to support the development of common standards and interoperable solutions for FinTech, to map the innovation facilitators set up by individual Member States and finally to assess the fitness of the existing regulatory framework for the use of disruptive technologies.
Since then throughout the Europe have been taking place a lot of projects in almost every nation: regulatory sandboxes and innovation hubs were established allowing the better development of the new FinTech services implementing innovative projects and thus facilitating the dialogue between entities and Competent Authorities.
Swiss regulators, one of the more prominent regulator on the matter, already established a ten principle list as main guidance to set a proper FinTech regulation: customer protection, FINMA (FINancial Market Authority) digital platform authorization provision, principle-based regulation and open door principle will be the crucial driver in such a great attempt.
The pandemic has played an important role in the FinTech apps utilization, as already said, and in the regulation too.
EU has initiated a public consultation entitled “Consultation on a new Digital Finance strategy” in the early stage of the measures applied to lessen the effects caused by the pandemic. This “consultation was designed to gather stakeholders’ views on policies to support digital finance”.
Many prominent financial industry actors express favor over such a move but, as for them, it will be possible only with an appropriate and clear regulation to put in place. Recently, institutional giants Square, Fidelity, Paradigm, and Coinbase joined forces and created a cryptocurrency council dubbed “The Crypto Council for Innovation”.
Change brings always benefits along, but it needs time and resilience to adapt in a better way. That is the case to the adoption of the FinTech and the regulation will represent a significant driver for its broader acceptance.
 Financial Stability Board, FinTech credit Market structure: models and financial stability implication, may 2017
 Fintech is here to stay, says JPMorgan chief Jamie Dimon (finextra.com)
 Bigtech Firms in Finance in Emerging Market and Developing Economies: Market developments and potential financial stability implications (fsb.org)
 Consultation on a retail payments strategy for the EU | European Commission (europa.eu)
 The EU’s FinTech Action Plan: charting the way forward | Fintech | Deloitte Lithuania
 SFTI-Positionspapier FinTech-Regulierung final (swissfintechinnovations.ch)
 Consultation on a new digital finance strategy – summary of responses (europa.eu)
 JPMorgan CEO Calls for More Regulatory Clarity for Cryptocurrencies | Blockchain News
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