On December 3rd, the European Internet Forum organized a lunch debate on the digital transformation of the financial sector, chaired by MEP Pilar del Castillo.
The debate featured the following speakers: Delphine Leroy, Policy Officer, Financial Technology and Sustainable Finance Unit, DG FISMA at the European Commission; Joel Rosenbaum, Head of Strategy and Corporate Development at Banco Santander; and Ciaran O'Malley, Head of Commercial Strategy at Trustly.
Chairing MEP Pilar del Castillo welcomed guests and introduced the topic by emphasizing that “the financial sector has been at the forefront of the digital transformation, technological development and new service providers”, yet it is facing disruption and inefficient competitiveness concomitantly. However, to fully reap the benefits of digitalisation, “the European Union has to ensure that all competition, data privacy and security are respected while allowing the sector to lead in innovation”. Furthermore, she stated, “We need to adapt the concept of dominance approach in policy making to consider consumer privacy, personal data protection and market disruptions”.
Ms. Delphine Leroy shared the European Commission’s point of view and highlighted that digitalisation in finance will bring not only challenges but also “a lot of opportunities for consumers and businesses” and will increase efficiency for the entire financial sector. She also reminded that the Commission has taken actions to support innovation in finance with initiative such as the revised Payments Services Directive (PSD2), and on crowdfunding and FinTech).
Mr. Rosenbaum, representing the banking sector, shared his own perspective on the issue, highlighting the commitments Banco Santander has made towards digital transformation, not only by investing €20bn but also by planning to develop a model where “a bank is one piece of a larger financial services platform”. This envisioned platform would allow consumers to be tied to other financial services and market players at the same time, a transformative approach which can only be achieved by working together with FinTech companies. Furthermore, Mr. Rosenbaum emphasized how “Banco Santander is committed to serving SMEs too, a sector where technology has reduced the cost to serve businesses and where there is an offer of a higher level of service – something that was not possible a generation ago”.
Mr. O’Malley brought to the table a perspective coming from the FinTech industry. Trustly is one of the largest and earliest European payment initiation service providers (PISP). In short, PISP stands for easy, convenient and secure online bank payments in comparison to other existing payment methods on the market. “Initiating more and more account to account payments could deliver the best possible online debit experience, giving merchants a genuine alternative to cards to support their customer propositions”, stated Mr. O’Malley. “Furthermore”, he added, “PISP enables a huge cross-border opportunity, moving us closer to a European single market.” Nonetheless, there are still challenges. First and foremost, Mr. O’Malley noted, “electronic payments lack effective competition, the kind which is supposed to expedite innovation”. The revised Payments Services Directive (PSD2) has been an important building block towards this goal, but its objectives and potential benefits have not been fully delivered on. “The implementation side is great in principle and enables the regulation of these new services, but the devil lies in the details on how it is performed on a technical level, ultimately creating stumbling blocks and not stepping stones”, he explained. In conclusion, Mr. O’Malley shared some suggestions on potential legislation changes, pointing to faster refund processes and seamless authentication experiences, both which cannot happen under the current framework of APIs.