An Action Plan on how to harness the opportunities presented by technology-enabled innovation in financial services (FinTech) was presented by the European Commission on March 8.

The Action Plan is aimed to enable the financial sector to make use of the rapid advances in new technologies, such as blockchain, artificial intelligence and cloud services. It also seeks to make markets safer and easier to access for new players.

According to a European Commission press release, this will benefit consumers, investors, banks and new market players alike. It said Europe should become a global hub for FinTech, with EU businesses and investors able to make most of the advantages offered by the Single Market in this fast-moving sector.

The Commission is also proposing a pan-European label for platforms, so that a platform licensed in one country can operate across the EU.

A first major deliverable tabled by the Commission is a new set of rules to help crowdfunding platforms to grow across the EU’s single market.

“To compete globally, Europe’s innovative companies need access to capital, space to experiment and scale to grow,” said Valdis Dombrovskis, Vice-President responsible for Financial Stability, Financial Services and Capital Markets Union. “This is the premise for our FinTech Action Plan. An EU crowdfunding licence would help crowdfunding platforms scale up in Europe. It will help them match investors and companies from all over the EU, giving more opportunities for firms and entrepreneurs to pitch their ideas to a wider base of funders.”

In turn, Jyrki Katainen, Vice-President for Jobs, Growth, Investment and Competitiveness, stressed that 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,” he said.

“Digital technologies have an impact on our whole economy – citizens and businesses alike,” added Mariya Gabriel, Commissioner for the Digital Economy and Society. “Technologies like blockchain can be game changers for financial services and beyond. We need to build an enabling framework to let innovation flourish, while managing risks and protecting consumers.”

According to the Commission, the financial sector is the largest user of digital technologies and a major driver in the digital transformation of the economy. The Action Plan sets out 23 steps to enable innovative business models to scale up, support the uptake of new technologies, increase cybersecurity and the integrity of the financial system.

The Commission will host an EU FinTech Laboratory where European and national authorities will engage with tech providers in a neutral, non-commercial space.

Welcoming the Commission’s Action Plan, the European People’s Party (EPP) group spokesman on Economic and Monetary Affairs, Burkhard Balz, said: “Today’s Commission proposal on crowdfunding platforms is an initial step to change this. By not having to comply with 28 different sets of requirements, but only one harmonised one, it allows the platforms to scale up”.

The proposal suggests the creation of an EU licence for crowdfunding platforms that would allow them to operate across the EU based on a single authorisation. It allows them to grow in Europe – currently German platforms can only operate in Germany, Croatian ones only in Croatia.

“There is an increasing need for diversifying funding options in the EU. Banks should not be the only source of money for businesses, particularly in innovative and emerging sectors such as FinTech. If it would be possible to find funding for an innovative idea just by clicking on a button on their smartphone, imagine the possibilities for European SMEs. For the EPP Group, it is, however, crucial that cybersecurity and level playing field aspects are not neglected. Access to funding has to be not only easy, but also safe”, said Balz.

According to Balz, the EU needs to make sure it benefits from these opportunities. It needs a strategy to sustain the development of new technologies in the financial sector, be it examples like payments through apps or the withdrawal of money without cards.

“Europe is best placed to become an innovation powerhouse in this field. It has a good academic base and broad access to technology, but what we need is a genuine Capital Markets Union so that we enable European innovators to stay in Europe”, concluded Balz.