ERFF Update on EU Retail Financial Services
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ERFF: European Retail Financial Forum

RFS Spotlight March 2017

Monthly EU Retail Financial Services update

Since its launch in October 2015, ERFF has been working with representatives of business, consumers, and EU policymakers to create consensus on value-added ways to open up EU retail financial services (RFS) markets. ERFF’s RFS Spotlight brings you news on EU RFS policy, events, and creating benefits for customers and industry.

EU Action Plan for retail financial services

The European Commission’s long-awaited Action Plan for retail financial services was announced yesterday, 23 March 2017. As Commissioner Dombrovskis, responsible for Financial Stability, Financial Services and Capital Markets Union, said at his press briefing and in his keynote address at the EC’s #FinTechEU conference: the Plan emphasizes the role of technology in offering consumers more choice and better products.

"The Plan puts consumers at the heart of our work on retail financial services.... The consumer should have access to the best products across the EU, not only in their own country," stated Mr Dombrovskis.

In his speeches, Commissioner Dombrovskis spoke about the opportunities of FinTech for consumers and businesses. He looked forward to a true digital Single Market in financial services which balanced innovation and consumer protection without over-regulation.

The Action Plan sets out 12 actions to build a deeper single market in retail financial services under three headings:
  • Increase consumer trust and empower consumers
  • Reduce legal and regulatory obstacles
  • Support the development of an innovative digital world
Several actions related to cross-border services identify further evidence-gathering and monitoring to tackle issues raised in the Commission’s 2015 Green Paper and consultation on retail financial services.  According to our sources, the Commission would like to be “more ambitious”, but it is waiting to see how Member States first transpose existing legislation before deciding on how to proceed.

The top priorities

We understand some of Commissioner Dombrovskis's priorities are:
  1. Lower fees on cross-border transactions
  2. Facilitating cross-border use of eID and Know Your Customer portability for customer identification
  3. Better creditworthiness assessment
On lower fees for cross-border transactions, the Commission will propose an amendment to extend existing regulation on euro transactions to all EU currencies, thereby reducing costs in all Member States whether euro-zone or not. Our sources indicate that there will be no opt-out possible from any amended regulation.

The Commission will also look at practices in dynamic currency conversion to identify ways consumers can be offered choice of the best rate. This may involve better enforcing or reinforcing existing legislation if necessary.

On electronic identification, the Commission will promote use of eID in the Member States and encourage notification and interoperability. On the heels of the upcoming transposition of the 4th anti-money laundering directive and its amendments, the Commission will launch an expert group to explore eiD-related issues and to develop common guidelines. The Commission is already conducting a study that is assessing the current regulatory and supervisory framework and best practices for remote identification and customer due diligence across the EU. Overall the approach is “small steps towards a big aim” – the goal of enabling consumers to use their eIDs to open bank accounts across the EU.

On creditworthiness, the Commission is planning to introduce common creditworthiness assessment standards and principles for lending to consumers. It will work to develop a minimum set of data to be exchanged between credit registers in cross-border creditworthiness assessments.

As for Commission President Juncker, we hear that he sees the actions on car rental and motor insurance as priorities. One targets transparency in car rental pricing. The second raises the possibility of revising the Motor Insurance Directive to improve cross-border recognition of claims history statements.

What else?

Besides the priorities above, the Action Plan contains two other directly consumer-focused actions aimed to deliver easier product switching and higher quality comparison websites.

In response to consumer complaints, the Commission will also monitor geo-blocking and the impact of the Payments Account Direct (PAD) with the aim of preventing unjustified discrimination without imposing excessive regulation.

Creating cross-border demand and growth

Despite its ambition for a single market in retail financial services, the Commission recognises in the Action Plan that many businesses see little consumer demand for cross-border services. Meanwhile, those that want to offer cross-border services are concerned about the risks and costs of varying national legislations. The Action Plan says that more evidence is needed to tackle these issues, although a study on barriers and good practices in the context of the free movement of capital is already underway. The results of this will feed into a set of roadmap actions which Member States would be encouraged to take by 2019.

FinTech public consultation

Support for innovation features strongly in the Plan. Thus, besides specific actions and projects to facilitate digital identification and authentication, the Commission will determine what more needs to be done based on the work of the EC FinTech Task Force and a public consultation on FinTech, which was also launched at the #FinTechEU conference.

On digital distance selling, the Commission will assess whether existing legislation such as the Directive on Distance Marketing of Financial Services is still fit for purpose, as well as monitoring the application of disclosure requirements. And with the results of an assessment of European markets for retail investment products due in 2018, the Commission also aims to identify ways to the improve the efficiency of intermediation channels.

In conclusion, the Commission states that “…substantial barriers to integration remain…” in retail financial services. Nonetheless, the benefits are worth fighting for and it invites “... Member States, national competent authorities, financial service providers and consumer organisations to join forces in building a genuine technology-enabled Single Market for retail financial services.”

Speaking from the #FinTech EU conference, Fiona Murray, ERFF Secretary General said: "ERFF welcomes the Commission's Action Plan and the consultation on FinTech. We believe that there are huge opportunities to offer consumers more choice and better products. A strong, innovative retail financial services market benefits everyone - businesses and individual customers. And ERFF will continue to work with EU policymakers and all stakeholders (consumer, start-ups and incumbents) to support the opening up of retail financial markets across Europe."

#FinTechEU conference now online

For those who couldn't attend, a webcast of the EC’s #FinTechEU – Is EU regulation fit for new financial technologies on 23 March is now available. The programme featured speeches and panel discussions on how technology is transforming finance, regulatory and supervisory innovation, and cybersecurity.

In answer to the conference's title question "is EU legislation fit for FinTech", there were plenty of qualified "yes's" from panellists representing both businesses and supervisors.

This said, peer to peer lending remained a contentious area with several calls for more consumer protection. But the big talking points were regulatory sandboxes and proportionality. Are sandboxes an effective way to drive innovation, enabling tests of new business models with a small group of consumers within a regulatory environment proportional to the size and level of risk? Or do they create unfair exemptions, instead of applying the principle of "same service, same rules"? Overall, the argument seemed come down on the side of sandboxes - and for active engagement between FinTech startups and supervisors. As several participants noted: whether for incumbents or new entrants, regulation is vital because it helps create the trust that encourages customers to use their services.

Coming up…    

24 April 2017: Towards principles and guidance on eID interoperability for online platforms. This is a new date for DG CNECT’s, one-day workshop in Brussels, for representatives of online platforms, private and business platform users, and other interested parties. Read more.

11 May 2017: DG Connect conference with particular focus on distributed ledger technology. We will bring you more details once they are available.


About ERFF

The European Retail Financial Forum (ERFF) brings together around one table consumers, business and policymakers to support the opening up of retail financial markets in Europe. Representing all aspects of the retail sector – traditional, wider investment and digital – we are customer-focused, favour removing key barriers, and increasing choice and transparency for all in ways that keep Europe competitive.

For further information, please contact us at:

ERFF Secretariat

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