European Union: European Banking Authority Publishes First Outputs From Its Fintech Roadmap

On July 3, 2018, following the publication of its FinTech Roadmap in March 2018, the EBA published two reports contemplated by the Roadmap. The first report sets out the results of a thematic review of the impact of FinTech on the business models of incumbent credit institutions. The second report outlines the perceived benefits and potential prudential risks of seven FinTech use cases. The EBA has also established a FinTech Knowledge Hub for the sharing of information and experience and promotion of emerging trends among EU national regulators.

The Thematic Report is designed to provide an overview of the current FinTech landscape and changes that the EBA has observed in incumbent institutions' behavior in adopting financial technologies. The EBA also intends that the Thematic Report will help raise awareness and share knowledge of the main trends affecting business models and assist supervisors and other stakeholders in identifying and understanding the potential challenges to the sustainability of incumbents' business models. In the Thematic Report, the EBA analyzes in depth the main factors driving digitalization and technological innovation in incumbent institutions and identifies the four key drivers as: (i) rapidly evolving customer expectations and behavior; (ii) profitability concerns (driven largely by the low interest rate environment); (iii) increased competition from new entrants (such as digital-based institutions), other FinTech firms (such as FinTech start-ups) and technology providers, which are together impacting a number of business lines, in particular payment, settlement and retail banking business lines; and (iv) regulatory changes, in particular the revised Payment Services Directive and the General Data Protection Regulation.

The Thematic Report provides a high-level overview of the extent to which incumbents have so far adopted technology-enabled financial innovations, such as biometrics, open banking/API strategies, cloud, machine learning/big data and blockchain. It considers the changes to incumbent credit institutions' strategies, internal organization and operations that innovation requires. It explores how incumbents interact with FinTech in a range of ways, from investing directly into new entrant FinTech firms to in-house development of technological solutions. Finally, the Thematic Report sets out five key risk factors that may affect the sustainability of incumbents' business models. These are: (i) digitalization strategies that incumbent institutions pursue to keep pace with a fast-changing environment; (ii) challenges arising from legacy ICT systems; (iii) operational capacity to implement the necessary changes; (iv) concerns over retaining and attracting staff; and (v) increasing risk of competition from peers and other FinTech firms.

The Prudential Risks and Opportunities Report has been prepared by the EBA with an objective to raise awareness and share information within the supervisory community. It does not make any recommendations and the EBA stresses that the report should not be considered as favoring or discouraging the application of any particular technology. The report provides an analysis of seven selected FinTech use cases, outlining for each the current landscape, underlying technologies, potential benefits and the potential microprudential risks that engagement with the technology might generate. While ICT risk is prevalent through many use cases and could be perceived as the key risk, the use of innovative technologies can potentially create new microprudential risks and amplify others. In varying degrees, depending on the use case, these include third- party risk through dependencies on third-party providers, ICT-outsourcing risk, ICT security and data integrity risks and legal, compliance, reputational and conduct risks. Some use cases also give rise to data privacy and data protection concerns. The report does not purport to provide an exhaustive list of prudential risks.

The seven use cases considered are:

  • Biometric authentication using fingerprint recognition.
  • Use of robo-advisors for investment advice.
  • Use of big data and machine learning for credit scoring.
  • Use of Distributed Ledger Technology and smart contracts for trade finance.
  • Use of DLT to streamline Customer Due Diligence processes.
  • Mobile wallet with the use of Near Field Communication technology.
  • Outsourcing core banking/payment system to the public cloud.

The EBA will continue to monitor FinTech developments in line with its Roadmap and further outputs can be

expected as its work progresses. The Thematic Report is available at:

http://www.eba.europa.eu/documents/10180/2270909/Report+on+the+impact+of+Fintech+on+incumbent+credit+ institutions%27business+models.pdf, the Prudential Risks and Opportunities Report is available at: http://www.eba.europa.eu/documents/10180/2270909/Report+on+prudential+risks+and+ opportunities+arising+for+institutions+from+FinTech.pdf, the EBA's FinTech Knowledge Hub is available at: http://www.eba.europa.eu/financial-innovation-and-fintech/fintech-knowledge-hub and details of the EBA's FinTech Roadmap is available at: https://finreg.shearman.com/european-banking-authority-publishes-fintech-road.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions