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FinTech action Plan: For a more competitive and innovative European financial sector

On 8th March 2018, the European Commission unveiled an Action Plan on how to harness the opportunities presented by technology-enabled innovation in financial services (FinTech). The Commission expressed that Europe should become a global hub for FinTech, with EU businesses and investors being able to make most of the advantages offered by the Single Market in this fast-moving sector. The Commission is also putting forward new rules that will help crowdfunding platforms to grow across the EU’s single market.

Action Plan envisages to enable the financial sector to make use of the rapid advances in new technologies, such as blockchain, artificial intelligence and cloud services. The actions set out will benefit the EU citizens and industry, and will foster a more competitive and innovative European financial sector, while maintaining high levels of consumer and investor protection. It has three main objectives:

• to support innovative business models to scale up across the single market;
• to encourage the uptake of new technologies in the financial sector;
• to increase cybersecurity and the integrity of the financial system

The Action plan sets out clear and concrete steps to promote the digital transformation of the financial services sector, including:

• Host an EU FinTech Laboratory where European and national authorities will engage with tech providers in a neutral, non-commercial space;
• Report on challenges and opportunities of crypto assets later in 2018 in the framework of its EU Blockchain Observatory and Forum; and 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.
• Promote the digitisation of information published by listed companies in Europe, including by using innovative technologies to interconnect national databases;
• Run workshops to improve information-sharing when it comes to cybersecurity;
• Present a best practice guide on regulatory sandboxes based on guidance from European Supervisory Authorities.

The Commission aims to make EU rules more future-oriented and aligned with the rapid advance of technological development. These initiatives mainly aim to enhance supervisory convergence toward technological innovation and prepare the EU financial sector to better embrace the opportunities brought by new technologies. This should enable innovative FinTech solutions to be rapidly rolled out across the EU and benefit from the scale economies of the single market, while preserving financial stability and ensuring consumer protection.

Benefit on Crowdfunding

Crowdfunding is particularly important in the early stages of business financing as it often is the main funding tool. Currently, crowdfunding is mainly conducted on the basis of national legislation; one of the biggest hurdles is the lack of common rules across the EU, which makes it difficult to provide service cross-border. By establishing a one-stop-shop access to the EU market, crowdfunding provides a platform and tailored rules to overcome the barriers. European crowdfunding services providers not only cover both investment-based and lending-based business models, but also offer online banking, online payment and transfer services.

The Commission’s proposal can entail a financial return for investors, the financial return model is either investment-based crowd funding, consisting of transferable securities (shares and bonds) issued by the company that raises funds, or it is lending-based crowdfunding consisting of entering into a loan agreement, for the investor. By increasing competition and lowering costs for business, EU would attract more market players and investors. Meanwhile, it gives more opportunities to European investors while safeguarding a high level of investor protection in relation to crowdfunding services. All these technologies can contribute to bringing down national barriers and spurring competition in areas.

Background

In November 2016 the Commission set up an internal Task Force on Financial Technology to address potential opportunities and challenges posed by FinTech. The Commission held a public consultation on FinTech in 2017 to gather stakeholders’ views on the impact of new technologies on financial services. Thus the Action Plan is based on the responses gathered in the consultation as well as the work of the Task Force on Financial Technology.

crowdfunding 2

Fintech Financial Technology Business Service Monetary Infographic

Source:
For more information and details regarding “FinTech Action Plan”, please visit the website at: https://ec.europa.eu/info/publications/180308-action-plan-fintech_en

For more tips on investing and trading in the EU, please contact the Business Cooperation Centre of Enterprise Europe Network Central China – Macao Office (EENCC Macao Office) at Tel: 2871 3338, 2872 7882/Fax: 2871 3339/Email: info@ieem.org.mo