EU recently released a fintech action plan. A financial lawyer, a fintech hub CEOCEO betyder Chief Executive Officer og er den øverste leder i en virksomhed, ansvarlig for den overordnede strategi og ledelse. CEO’en rapporterer normalt ti More and a crowdfundingCrowdfunding er en finansieringsmetode, hvor en stor gruppe mennesker bidrager med små beløb til at realisere et projekt eller en idé. I Danmark har crowdfun More pioneer offer reactions ranging from lukewarm to ecstatic.
Scandinavian fintech’s fuel consists of talent, capital, cross-industry collaboration, and regulations – according to this Deloitte report. In the right amounts all four serve as catalysts, but if the mix is wrong, they can act as inhibitors.
When asked, fintech thought leaders, especially, single out rigid regulations as a potential impediment to the financial, technological advancement.
Globally, government’s regulatory response to fintech has varied from American aversion to Asian adaption. Many appraise Europe for its efforts to accommodate financial innovation. PSD2 for one is groundbreaking, and now a new Fintech Action Plan aims to pave the way for tomorrow’s fintechs.
23 – small – steps to embark a regulatory journey
In 23 steps the action plan is set in place to enable business models to scale up, support the uptake of new technologies, increase cybersecurity and the integrity of the financial system.
In a statement accompanying the new action plan the commision explains that the new action plan is a part of two larger objectives.
Firstly to create a Capital Markets Union that would enable funding and investments cross borderlines more easily. Secondly to create a Single Digital Market that would entail a true single European market for consumer financial services.
“New technologies are transforming the financial industry by revolutionising the way people access financial services. Alternative sources of funding, such as crowdfunding or peer-to-peer lending, directly link savings with investments. They make the market more accessible for innovative entrepreneurs, start-ups and small companies. This objective is at the heart of the Capital Markets Union,” says Jyrki Katainen, Vice-President for Jobs, Growth, Investment and Competitiveness in said statement.
We have asked a financial lawyer, a crowdfunding association chair and a fintech hub CEO for their perspectives on the new fintech action plan.
Financial Lawyer: fintech is more than crowdfunding
Michael Camphausen is a financial lawyer at Camphausen & Co, holds a PhD. in financial regulations and was a part of the consultation response process that preceded the new Fintech Action Plan’s release.
According to him, the Fintech Action Plan shares more characteristics with a descriptive report rather than an actual plan of action with concrete regulatory initiatives.
With that caveat in mind, he welcomes the new overall initiative that holds an important signal value that could prove to be a boon to the fintech ecosystem.
“The Fintech Action Plan underlines the fact that innovation, new financial business models and new financial technology are on European legislators’ agenda. The implied underlying mandate is the most important part of this venture,” says Michael Camphausen.
He had hoped that especially cloud computing had received regulatory attention right now, but this iteration of the initiative has – solely – set its scope on one of fintech’s legacy business models, crowdfunding. And that part of the initiative holds a promise for Nordic crowdfunding services.
“Today fintech is everything from Neobanking to PSD2. But crowdfunders were the first fintechers. As of now, crowdfunding legislation is fragmented across state borders, which makes it hard to offer services to the entire European market. When EU pass the legislation you only need to apply for a common European certification to operate in the single market,” says Michael Camphausen.
Crowdfunding Association Chair: the culmination of years work
Crowdfunding is the only branch of fintech to receive special regulatory attention in the fintech action plan. That attention is the culmination of years of lobbying and giving consultation responses to EU for Michael Eis, who is the chair of the Danish Crowdfunding Association.
”We have been in talks with the commision for quite some time now, and they are heading in the right direction. Now we will take a closer look at the action plan and investigate what they are proposing. Obviously, this is still just a suggestion for a piece of legislation – so there is still work ahead for us until it becomes law. We have worked on this for two years and will naturally continue to do so,” says Michael Eis.
Should the new suggestion become law he sees multiple potential benefits for his members:
“Denmark is a relatively limited area in regards to the numbers of consumers. But if the rest of Europe is opened up it would mean a multiplication of potential clients for Danish crowdfunding platforms,” says Michael Eis and continues:
“Furthermore a uniformisation of regulations would also mitigate the competition from being distorted by local governments interpretation of regulations such as MIFID2.”
MIFID2 aims at protecting investors from making investments that they do not have the capability to understand. According to Michael Eis Denmark has chosen to be very strict on that parameter as opposed to Finland and the UK.
“Denmark has set the standard high and enforced MIFID2 very strictly. The Danish platform, Crowdinvest, is required to ask complex questions for the appropriateness test. In Finland and the UK the platforms are required to ask four basic questions that are so simple that my 13-year-old daughter could answer them,” says Michael Eis.
He attributes the accomplishment to crowdfunding being a legacy fintech despite its young age as well as the strong organization of the stakeholders.
“I founded the association five years ago and it was one of the first in Europe. We have been well organised from the beginning. Furthermore, we have personnel that have EU competencies and good lobbyists. Those are the demands if you want to effectuate your demands,” says Michael Eis.
Fintech Hub CEO: unified market regulations creates a level playing field
Copenhagen Fintech’s CEO, Thomas Krogh Jensen, sees market unification as a good. Anything that will help Danish and Nordic startups scale from their home markets.
“The crowdfunding initiative is great. We support any initiative that helps companies scale outside their home country’s borders. Obviously there are a host of other fintech areas where a pan-European license also would be beneficial, but for now, we are positive,” says Thomas Krogh Jensen.
One thing is an easier regulatory process for the startup, but a valuable byproduct of unified regulations is to focus on competing on fintech solutions and not relaxed regulations at a country level.
“We want innovative solutions to compete and not what country is willing to take their foot of the regulatory brake pedal. By unifying market regulations you create a level playing field. That way it will not matter whether a startup is based in Spain, Italy or Denmark. Market entry barriers or the lack thereof should not be part of the game,” says Thomas Krogh Jensen.