Greta Schulte
Contributing Member of the European Fintech Association on behalf of N26
Europe is home to some of the most innovative fintech companies globally, but the highly fragmented regulatory landscape keeps it from realising its full potential.
The European Union has the potential to lead the revolution towards tech-driven, fully digital financial services, providing users with new and innovative ways to manage their finances safely and securely. Home to several fintech companies that are active across borders, Europe is well equipped to challenge global competition – in theory.
Removing operational barriers is key
The current regulatory framework across the European internal market has still not been harmonised adequately, hence creating a challenging environment for European fintech companies. Activities of today’s digital players are still largely governed by rules written in an analogue era for companies with brick and mortar branches whose businesses did not expand beyond national borders.
For Europe to become a champion on a global scale, these operational barriers need to be removed in favour of harmonised regulation.
These regulatory standards significantly hamper fintech companies’ ability to scale up cross-border. Examples of the significant operational barriers companies in Europe are facing are duplicative anti-money laundering requirements, diverging Know Your Customer rules, ongoing IBAN discrimination and a patchwork of consumer protection rules.
In order for Europe to become a champion on a global scale, these operational barriers need to be removed in favour of harmonised regulation, based on the principle of “same activity, same risk, same rules”, rather than national regulators applying a “one size fits all” approach.
The first steps have been taken
The good news is that there are recent examples of the European Union taking positive steps to harmonise regulatory requirements.
The European Commission’s proposal on the review of the eIDAS regulation, as well as its recent efforts to establish a harmonised European framework to prevent money laundering and counter terrorist financing in the EU, are crucial first measures towards enabling a true internal market. They have the potential to remove barriers and allow for an interoperable environment for European fintech companies. However, more work needs to be done.
In order for 450 million Europeans and users worldwide to benefit from digital finance, playing catch-up is not enough – bolder policy action is required. European fintech companies are ready to work together with regulators and the government to make Europe competitive on a global stage a reality.