Financial markets are constantly evolving. In fact, over the last few years, new figures have arisen that challenge the way we’ve previously viewed financial markets. One of the biggest factors that has led to this drastic change that we’re now seeing across the board is a technological revolution where new concepts such as Fintech, Insurtech, and Regtech are on the rise.
New figures have emerged as a result of this revolution which, in some cases, seems to be in a somewhat regulatory limbo. This is due to the lack of provision and normative regulation surrounding them. Nevertheless, this lack of regulation does not necessarily mean that they aren’t under legal protection.
But tech innovation in the financial sector is no new concept. The transition taking place in the way financial services are provided is having an impact on both the demand and supply of the industry. In terms of demand, new generations of digital natives are making substantial changes in their consumption and saving habits. As a consequence, businesses have had to adapt their methods and access new financial markets. On the other hand – in terms of supply – there is a noticeable increase in the number of participants within the digital market. These are so-called Fintechs. The industry must now focus on specific segments within the chain of value and separate services which were previously connected by the banks.[1]
In fact, the Fintech industry has been expanding at an exponential rate, growing from less than two and a half thousand million dollars in 2010 to almost twenty thousand million in 2015. Thanks to the emergence of these new participants, we can now expect to see improvements to the financial landscape. Improvements include a reduction in service costs and its democratization in a world where there are still two thousand people without a bank account.[2]
These changes to technological habits which are now being used throughout the financial world empower new agents inside the market by making the innovation a transformative value itself. This could be beneficial to society as a whole as it reduces intermediation costs and facilitates access to markets for new participants.
However, the new figures surrounding this technological innovation are not always protected by the existing regulations within the financial market. Given the security and consumer protection risks that they present, it is necessary to develop a specific regulatory frame for these new participants.
Under these circumstances, regulators must focus on providing a regulation that covers both these new digital values (which benefit the consumer and increase competition within the market) and which covers the risks that may be presented alongside them[3]. The lack of a common regulation within the European market is hindering the development of online platforms, as it implies risks and does not level the playing field between financial and non-financial institutions.[4]
With that in mind, it doesn’t seem too bold of a statement to suggest that – given the speed at which these financial markets are evolving – it is unlikely that these regulations will become a reality. For this reason – and as we are both lawyers and law students – we must fully understand the ins and outs of the current legal sphere. By doing so, we will then be able to understand the new realities the market is facing.
Despite there being a lack of any “ad hoc” legal frameworks surrounding each innovation in the financial markets field, this doesn’t necessarily mean that there is a lack of legal protection for the same fields.
By understanding these reasons, we can then try to scope out the reality of these innovations and the role they are playing on current regulations. Furthermore, we should also take into consideration the market’s underlying principles and the functions these have on the market. Given the fact that Fintech and Insurtech agents are rapidly evolving, it will remain that there will always be room for innovation outside of the regulatory frame. As a consequence, this would lead to protection also falling outside of a comprehensive regulatory frame.
This adaptation of the existing regulation to the current reality of the markets doesn’t necessarily mean that the legislator should no longer continue to update and adapt the regulation of the markets to comply with current realities. On the contrary, it is essential that they continue to provide and adapt a juridical framework for market protection. However, they must make sure that they are never prejudice towards the existing regulatory framework. The new framework must be an updated interpretation of the current juridical situation, so as to comply with the new realities within the market.
In sum, FinTech is gaining significant momentum and is causing disruption within the traditional value chain of financial institutions, as well as to the economic landscape of numerous different countries and markets. As a result, we now have a duty to ensure that we fully understand the legal and economic implications of this new wave of technology.
For this reason, El Instituto de Empresa is launching a pioneer executive program in Fintech. The program will be led by Ana García, a partner at Baker & McKenzie where she is also the Head of Financial Services Regulation.
The Fintech Advanced Program seeks to create a benchmark for training in the financial digital services, digital banking and new technological tendencies sectors, among many others. It will focus on all sectors from a legal perspective.
This advanced program is designed for individuals who wish to gain a deeper understanding of Fintech and who are aspiring to be innovative change-makers within the financial sector. The course will equip business leaders, managers, lawyers, financial executives, IT experts and entrepreneurs with all the tools they need to gain a thorough understanding of the Fintech industry as a whole. Participants will develop a disruptive way of thinking that they will easily be able to transfer across into their day-to-day lives.
To learn more about the Fintech Advanced Program, visit: https://www.ie.edu/law-school/programs/executive-education/fintech/
[1] Basado en extractos seleccionados de Vid supra. 1
[2] GOIRIGOLZARRI, José Ignacio (Agosto 2016) El sector bancario en Europa: presente y futuro. Boletín de estudios económicos, Deusto Business Alumni.
[3] Basado en extractos seleccionados de Vid supra. 1
[4] BBVA Research (January 2017) Turning the spotlight on shadow Banking. Digital Economy Outlook.
