Response to discussion on Approach on financial technology (Fintech)
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Threats are related to risk management, testing and cybersecurity. Special attention should be put to proper testing and audits when building new services. Effort should also be put to ensure that Fintech entities have their risk management practices at sufficient level and that they have understanding of the risk management required from financial service providers
Incumbent credit institutions also face challenges with the lean working methods that FinTech providers have. Incumbent credit institutions may have very long and detailed decision making processes.
Because of this market development, a lot of emphasis should be put to resolution. There should be guidelines on exit plans. FinTech entities should have and exit plan or a plan in case of sales of their business to another service provider in place already before entering the market.
Question 1: Are the issues identified by the EBA and the way forward proposed in section 4.1 relevant and complete? If not, please explain why.
The Commission has established a Fintech taskforce and their public consultation on FinTech ended on June 15th. The Commission is going to draft a Fintech action plan based on its background work and the responds given to the Fintech consultation. The commission has already stated in its mid-term review of the Capital Market Union that As part of a comprehensive approach to enable FinTech, the Commission will assess the case for an EU licensing and passporting framework for FinTech activities in Q4 2017." It is important to take this schedule in mind in the timeline of the further work of EBA and to actively discuss with the Commission."Question 2: Are the issues identified by the EBA and the way forward proposed in subsection 4.2.1 relevant and complete? If not, please explain why.
Yes, in our opinion EBA should put much emphasis on the work related to risks and risk management. It is vitally important to ensure that the risk management of FinTech entities is at sufficient level. This should be the primary focus of the EBA work on FinTechQuestion 3: What opportunities and threats arising from FinTech do you foresee for credit institutions?
Partnership opportunities and improved user experience.Threats are related to risk management, testing and cybersecurity. Special attention should be put to proper testing and audits when building new services. Effort should also be put to ensure that Fintech entities have their risk management practices at sufficient level and that they have understanding of the risk management required from financial service providers
Question 4: Are the issues identified by the EBA and the way forward proposed in subsection 4.2.2 relevant and complete? If not, please explain why.
YesQuestion 5: What opportunities and threats arising from FinTech do you foresee for payment institutions and electronic money institutions?
Value chains are becoming more complex. The rise of FinTech might accelerate the provision of financial services that are actually a combination of services provided by many entrepreneurs, each of them providing a certain part of the “total” service that the customer is using. This could be beneficial for PI’s and EMI’s, since it allows them to concentrate on the part that is essential for their business and that is their core knowhow. Simultaneously, there might arise risks if the co-operating parties or sub-contractors do not fulfil their duties and the PI/EMI should bear the responsibility towards the customer/regulator.Question 6: Are the issues identified by the EBA and the way forward proposed in subsection 4.3.1 relevant and complete? If not, please explain why.
YesQuestion 7: What are your views on the impact that the use of technology-enabled financial innovation and/or the growth in the number of FinTech providers and the volume of their business may have on the business model of incumbent credit institutions?
Credit institutions are likely to lose some of the income that they currently receive from payments to payment initiation service providers introduced by PSD2. This might have an effect on incumbent credit institutions business models.Incumbent credit institutions also face challenges with the lean working methods that FinTech providers have. Incumbent credit institutions may have very long and detailed decision making processes.
Question 8: Are the issues identified by the EBA and the way forward proposed in subsection 4.3.2 relevant and complete? If not, please explain why.
YesQuestion 9: What are your views on the impact that the use of technology-enabled financial innovation and/or the growth in the number of FinTech providers and the volume of their business may have on the business models of incumbent payment or electronic money institutions?
-Question 10: Are the issues identified by the EBA and the way forward proposed in subsection 4.4.1 relevant and complete? If not, please explain why.
YesQuestion 11: Are the issues identified by the EBA and the way forward proposed in subsection 4.4.2 relevant and complete? If not, please explain why.
YesQuestion 12: As a FinTech firm, have you experienced any regulatory obstacles from a consumer protection perspective that might prevent you from providing or enabling the provision of financial services cross-border?
-Question 13: Do you consider that further action is required on the part of the EBA to ensure that EU financial services legislation within the EBA’s scope of action is implemented consistently across the EU?
NoQuestion 14: Are the issues identified by the EBA and the way forward proposed in subsection 4.4.3 relevant and complete? If not, please explain why.
YesQuestion 15: Are the issues identified by the EBA and the way forward proposed in subsection 4.4.4 relevant and complete? If not, please explain why.
YesQuestion 16: Are there any specific disclosure or transparency of information requirements in your national legislation that you consider to be an obstacle to digitalisation and/or that you believe may prevent FinTech firms from entering the market?
NoQuestion 17: Are the issues identified by the EBA and the way forward proposed in subsection 4.4.5 relevant and complete? If not, please explain why.
Yes the issues are relevant, but EBA should also keep in mind that there are also other actors than NCAs that are actively involved in the work related to financial literacy. In Finland, the central bank is working a lot with the promotion of Financial literacy in cooperation with the Association for Teachers of History and Social Studies in FinlandQuestion 18: Would you see the merit in having specific financial literacy programmes targeting consumers to enhance trust in digital services?
Yes, but it should be considered carefully that who would be the best and relevant body for drafting such programmes.Question 19: Are the issues identified by the EBA and the way forward proposed in subsection 4.4.6 relevant and complete? If not, please explain why.
YesQuestion 20: Are the issues identified by the EBA and the way forward proposed in section 4.5 relevant and complete? If not, please explain why.
Relevant, but not complete. As financial services markets evolve thanks to digitalisation, we are likely to see more financial service providers entering the market. It is highly likely that not all of these services gain a sufficient market share and a number of customers for the services to become profitable. Therefore we are going to see financial service providers that enter the market, but end offering their services in a few years' time.Because of this market development, a lot of emphasis should be put to resolution. There should be guidelines on exit plans. FinTech entities should have and exit plan or a plan in case of sales of their business to another service provider in place already before entering the market.