The European Union (EU) Executive's Vice President Valdis Dombrovskis said on Thursday, 23rd March 2017, that the Commission is considering how to regulate the expanding sector to encourage its development in Europe, while protecting consumers from risks that may emerge.
Passporting for Fintech services is a right or license that would allow Fintech companies to expand across border and operate anywhere within the EU’s single market. This is significant in that it significantly lowers regulatory and bureaucratic obstacles for operations, growth and expansion of Fintech, an industry and concept that is slowly but surely affecting practices and efficiencies across a wide range of sectors, not just financial services.
This statement by the EU is also significant in context of London’s position as a leading global Fintech hub which is coming under significant scrutiny as the UK secedes from the European Union. While terms are yet to be determined, there is a high probability that the UK will lose the single market privileges of the European Union, which would adversely impact its growth potential. Continental rivals such as Berlin, Frankfurt, Paris and Luxembourg are among those queuing up to replace London in the spotlight amidst the uncertainty that will surround London over the next two years as the UK negotiates its divorce from the EU.
The Commission said it will propose rules by the end of the year to cut retail fees imposed on payments made across borders inside the EU with currencies other than the euro. If approved by legislators and EU states, the measure would strongly impact banks, which profit most from the cross border charges. Fintech payment services already offer much lower fees. Hence, we can see how these passporting right would allow incumbents to become increasingly competitive, provided that they are in EU.
The Commission is also considering measures next year to make conversion rates more transparent for EU consumers using payment cards or withdrawing money in other member states, in a bid to bring down costs.
Crowd Valley welcomes the measures to boost Fintech growth since they align with our principles of financial inclusion and innovation allowing the consumer and entrepreneur to easily engage financial services across the large single EU market by lowering cross border fees and making Fintech demand-supply more symmetric and efficient. With regards to Crowd Valley, these measures would reduce fees associated with some members of our third party ecosystem such as payment processors for cross border transactions.
This article was first published on Crowd Valley Blog.
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