ESMA responds on Fintech

ESMA has responded to the Commission’s consultation on Fintech. It sees Fintech as a positive evolution so long as business models continue to aim to improve the customer experience and financial inclusion. It identifies some concerns that it thinks need to be addressed, including:

  • the risks (from a market integrity and investor protection standpoint) and costs of using AI and big data;
  • the need for an EU wide crowd-funding regime;
  • the need for outsourcing, however achieved, to comply with regulatory standards, and there should be no difference between different technologies that may be used;
  • the possible need for a regulatory response on distributed ledger technology, although it cannot at the moment see any major impediments that would prevent DLT emerging in the short term;
  • the need to ensure that entities that provide the same service should be regulated and supervised on an equal basis, while recognising that Fintech start ups are likely to need help navigating the regulatory framework. But it says this does not mean they should be supervised differently; and
  • it is in favour of data standardisation and harmonisation. However, it says it is “highly questionable” that standardisation can be competition-friendly.

It also supports the increased use of RegTech and has annexed to its report the results of a survey it carried out on regulated crowdfunding platforms in the EU.