On March 15, 2018, the EBA published a Roadmap setting out its conclusions following responses to its August 2017 discussion paper on its approach to financial technology. The EBA adopts the definition of FinTech that is used by international standard-setting bodies, namely, "technologically enabled financial innovation that could result in new business models, applications, processes or products with an associated material effect on financial markets and institutions and the provision of financial services."

Regulators and supervisors must balance, on the one hand, the needs for consumer protection, a level playing field, the integrity of financial markets and the stability of the financial system against, on the other hand, the need to ensure the opportunities presented by FinTech can be fully realized.

In the August 2017 discussion paper, the EBA set out proposals for further work in the following areas: authorizations and regulatory sandbox regimes; prudential risks for credit institutions, payment institutions and e-money institutions; the impact of FinTech on business models; consumer protection and retail conduct of business issues; the impact of FinTech on the resolution of credit institutions and investment firms and the impact of FinTech on anti-money laundering and countering the financing of terrorism. The Roadmap sets out the EBA's responses to the feedback it received on the discussion paper and the EBA's next steps, including an indicative timetable for completion of its further work. The EBA's 2018/2019 priorities are:

  • Authorization and regulatory perimeter issues—the EBA expects to publish a report (and an opinion if appropriate), before the end of 2018, on its assessment of the regulatory treatment of FinTech firms, including authorization and perimeter issues. The report will include, where appropriate, best practices and recommendations on the need, if any, for adaptations to EU financial services legislation to ensure a proportionate, technologically neutral approach to licensing of FinTech firms.
  • Regulatory sandboxes and innovation hubs—the EBA will conduct a further survey of national regulators to build on assessments it has already made, and will report by the end of 2018 on the outcome of that survey. It may also produce an opinion and/or proposals to promote best practices to enhance supervisory consistency in the operation of regulatory sandboxes. The EBA will work in close cooperation with the other ESAs on this workstream.
  • FinTech's impact on incumbent business models and new prudential risks and opportunities for incumbent institutions—the EBA has recognized that more dialogue with industry may be needed to understand the practical application of FinTech, changes to incumbent institutions' business models and risk profiles and potential financial stability issues (for example, from virtual currencies). The EBA proposes to publish thematic reports during 2018 to provide an overview of the current landscape and key trends in the EU internal market, along with a summary of supervisory views on prudential risks and the opportunities for financial sector institutions.
  • Cybersecurity—given that cybersecurity is a broader issue than FinTech, the EBA proposes to continue its work on cybersecurity under the broader scope of its work on ICT security. This work will focus on producing ICT guidelines (including for mitigation of cybersecurity risk) for credit institutions and investment firms, harmonizing supervisory practices for the management of cybersecurity risk in credit institutions, investment firms, payment institutions and e-money institutions and evaluating the development of an intelligence-led cyber threat testing framework.
  • Consumer protection—the EBA proposes to include, in its report on authorization and perimeter issues, an assessment of the conduct of business requirements applicable to FinTech firms, to ensure an adequate level of consumer protection. The EBA will also focus, during 2018–2019, on cross-border issues, disclosures to consumers, automation in advice, the availability of dispute resolution mechanisms and issues of financial exclusion in the context of big data algorithms. The EBA will further continue to monitor big data, financial literacy initiatives and the interaction of the revised Payment Services Directive with the General Data Protection Regulation and will continue to monitor developments at EU in respect of electronic identification.
  • AML/CFT—the EBA will continue to engage jointly with the other ESAs in this area, continuing an ongoing joint fact-finding exercise to identify the money laundering and terrorist financing risks associated with innovative solutions and FinTech. The results of the exercise may inform further work by the EBA.
  • Knowledge sharing—the EBA proposes to form a FinTech Knowledge Hub in 2018. The Hub will provide a forum to facilitate sharing of information and experience and promote knowledge of emerging trends among EU national regulators.

The EBA FinTech Roadmap is available at: http://www.eba.europa.eu/documents/10180/1919160/EBA+FinTech+Roadmap.pdf and the August 2017 discussion paper is available at: http://finreg.shearman.com/european-banking-authority-discussion-paper-on-it.

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