European Fintech Alliance (EFA) and EPP
On Wednesday, December 6th, SME Europe in cooperation with European Fintech Alliance (EFA) hosted a lunch debate on the current state and future prospects of European regulation of the Fintech and banking industry. This debate took place in the light of the recently adopted Regulatory Technical Standards (RTS) on Strong Customer Authentication (SCA) and Communication under the Payment Services Directive (PSD2).
Following the introduction of Dr Horst Heitz, Director Executive of SME Europe, Alessandro Tschirkov of EFA moderated a lively debate that went, amongst others, into details on the future relation and cooperation between ASPSPs (banks), TTPs (Fintechs) and regulators. Philippe Pellé of DG FISMA noted that the increased number of Fintechs and thus increased competition can be traced back to the fact that financial business incumbents have not answered to the emerging needs of customers, especially in the payments sector. He claimed that past initiatives by the European Commission to protect consumers concerning charges for online payments have been a wake-up call for banks. Moreover, he described opening the market of financial services to competition as well as bringing legal certainty to market players as the primary aim of the PSD2 Directive. To a certain extent, the Directive was also a response to existing data protection rules, to ensure a level playing field for third party providers. As a next step, the Commission will set up a working group to validate the Application Programming Interfaces (APIs) which will replace the current practice of screen scraping in the future. On another note, his colleague Dr Joachim Schwerin of DG GROW added that there is no field “that is developing as quickly as fintechs” and expressed his hope that these might contribute to the currently deteriorating access to finance for SMEs.
Cornelia Schwertner, EFA Co-Chair and Head of Regulation at figo, presented her input on challenges for open banking. While she considered PSD2 to be only the beginning of open banking, she moreover emphasised that good APIs are the result of good incentives. Arturo Gonzales Mac Dowell, member of EFA and president and CEO of Eurobits, added that first and foremost, the balance between the best technology and the right incentives for technology is key, so that SMEs can benefit from FinTech just as much as large companies currently do. Moreover, he sees the danger of potential overregulation of the sector, that runs the risk of stifling innovation, as well as the danger that there will be different interpretations of the PSD2 directive among Fintechs, banks and national supervisors.
The debate concluded with three key recommendations:
- ensuring a balanced representation with strong expertise in API for the envisaged market group
- close coordination between the Commission, the European Banking Authority (EBA) and national supervisory authorities to ensure a consistent interpretation of the scope of PSD2 and data protection rules
- swift approval of the RTS on SCA and communication under the PSD2 by the European Parliament and the Council