The European Commission has begun consultations on two financial services areas: digital finance and retail payments. It is seeking views on topics including distributed ledger technology (DLT) – of which blockchain is an example – and digital identity schemes.
The Commission notes that the coronavirus pandemic means there is a heightened need for well-regulated digital infrastructure in Europe. The executive branch of the 27-member European Union says coronavirus has “underlined the importance of innovation in digital financial products, as reliance on remote services has increased considerably”.
The digital finance consultation will inform the Commission’s new Digital Finance Strategy, which will be presented later this year. It seeks views on boosting innovation across the EU, while “considering possible competition issues with Big Tech companies”: the EU has long been concerned by the power of Silicon Valley-headquartered technology companies, which are increasingly entering financial services directly.
The second consultation seeks feedback on a forthcoming Retail Payments Strategy for the EU, also to be adopted later this year. Again acknowledging the imperative of the global health crisis, the Commission says that efficient payment systems and services can “contribute to improving the EU’s ability to deal with emergencies, such as the coronavirus pandemic”.
The 58-page digital finance document includes sections on three key aims: ensuring that the EU financial services regulatory framework is “technology neutral and innovation-friendly”; further harmonisation towards a European single market for digital financial services; and promoting a data-driven financial sector.
The consultation includes questions on artificial Intelligence (AI) in finance, such as: ‘Have you refrained from putting AI based services in production as a result of regulatory requirements or due to legal uncertainty?’.
The Commission adopted a new European data strategy and a white paper on AI, described as the first pillars of a new overarching EU digital strategy, in February. A public consultation on the AI white paper is also ongoing, and is scheduled to close on 31 May. The Commission presented its first AI strategy in 2018.
The consultation on retail payments is aimed at informing what would be the EU’s first Retail Payments Strategy.
The 43-page document is focused on ultimately achieving four key objectives: fast, convenient, safe, affordable and transparent payment instruments, with pan-European reach and “same as domestic” customer experience; an “innovative, competitive, and contestable” European retail payments market; access to safe, efficient and interoperable retail payments systems and other support infrastructures; and improved cross-border payments, including remittances and facilitating the international role of the euro.
Questions include whether the EU should consider introducing measures to preserve the access to and acceptance of cash – a hot topic in EU member states including Sweden, which is widely cited for its low levels of cash use. Meanwhile the consultation’s second section examines Application Programming Interfaces (APIs) and so-called “programmable money”.
EU’s aim to become a frontrunner
Launching the two consultations, the Commission’s executive vice-president for an economy that works for people, Valdis Dombrovskis, said: “The coronavirus crisis has shown just how much we rely on technology and digital financial services to go about our daily lives, including for paying remotely for essential goods and services. If Europe is to reap the benefits of innovative financial services over the years to come and become a frontrunner in this field, we need to strike the right balance between promoting innovation and properly managing risks to consumers and investors. The consultations will help us strike that balance.”
Both consultations close on 26 June and have a slightly longer response timeframe than would be typical, reflecting the coronavirus situation. Other finance-related consultations ongoing at European level include one on the revision of the non-financial reporting directive, which has been extended to 11 June; and one on the renewed sustainable finance strategy, which has been extended to 15 July.