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In the EU, technology-enabled innovation in the financial sector (‘FinTech’) is driving the emergence of new business models, applications, processes and products. Indeed, FinTech could have real impact on financial markets and institutions and how financial services are provided.
Technology-enabled financial services are provided by different types of market participant: incumbents (banks, insurers, investment firms, pension funds, financial infrastructures, etc.); big non-financial firms, (including the so called BigTechs, such as internet search and advertising companies, device manufacturers, commercial platforms, but also telecoms operators) and by start-ups.
They design technology-enabled financial services for use on the Internet and on mobile devices, combined with other recent technologies, such as cloud computing, distributed ledger or blockchain technology, or Artificial Intelligence (AI). The results have a lesser or greater degree of originality, some heavily resemble well-known services and products (such as mobile payments), others appear to break new ground (such as crypto-assets, initial coin offerings, or automated investment advice).
This Expert Group has been established by the European Commission, in accordance with its 2018 FinTech Action Plan, to review the application and suitability of the European legal and regulatory framework to FinTech in order to identify issues that may impede the scaling-up of FinTech in the EU.
It was asked to analyse the extent to which the current framework for financial services is technology-neutral and able to accommodate FinTech innovation and whether it needs to be adapted, also with a view to making the framework future-proof. At the same time, it was asked to consider how financial stability, financial integrity, and consumer and investor protection can be ensured in light of the new opportunities and risks afforded by FinTech.
This Group is aware that many technological innovations, such as AI, Big Data and DLT/Blockchain, have uses beyond finance, in very different areas of economic and social life and across the public sector.
For this reason, it is relevant to consider changes to the general regulatory framework (across multiple industry sectors), as well as the framework for the regulation of the financial services sector, which may require tailored responses in order to be able to realise the potential of specific opportunities and to take account of specific regulatory concerns in an already highly regulated environment.
In particular, there are universal aspects, such as ethical considerations, where finance sector-specific approaches and those in other areas of life merit special attention in order to ensure consistency. One example may be the use of AI and Big Data in the context of client interfaces (robo advice, chatbots, insurance pricing and underwriting, credit scoring, or certain other applications) – where there are faced similar ethics-related issues as in other areas of life, such as healthcare.