The European Commission aims to propose recommendations for financial technology firms early next year, taking a first step towards assessing the risks and rewards presented by a sector that is shaking up traditional banking.
Known collectively as fintech, such firms are developing new forms of online credit such as crowdfunding and peer-to-peer lending, and mobile apps for making payments and sending money abroad.
They are hitting banks’ already decreasing margins and, while being praised as innovators and for creating new jobs, are subject to few checks and regulations.
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Announcing an internal task force meant to propose recommendations for the sector in the first half of next year, EU financial services commissioner Valdis Dombrovskis said technological innovation in finance was a development to be encouraged.
“It brings huge opportunities for consumers and for industry,” he said. “Our task force will help us make sure that our policy supports the pursuit of these opportunities, while addressing any risks that may emerge.”
The Commission did not clarify whether fully-fledged regulation is on the cards, but some regulatory changes appear likely.
How Big Banks Are Making Fintech Work
“If you think payment services by banks need to be strictly regulated, then you also need similar measures for those who provide payment services without a banking license,” Elke Koenig, the head of the Single Resolution Board, a European banking watchdog, told Reuters.
She added that not all fintech need to be regulated, but the sector requires closer regulatory attention.
Banks urged common rules and supervision for all.
“We should move from entity-based rules to activity-based rules,” said Wim Mijs, head of the European Banking Federation (EBF), the body representing the interests of banks.
He said fintech firms can in most cases become allies of banks by helping lenders innovate while profiting from their clients and regulatory expertise.
But in a paper on fintech, EBF warned against possible competition risks arising from digital platforms such as Google (goog), Facebook (fb) , or Apple (aapl), which may increasingly use their customers’ personal data to provide alternative financial services.