This Report addresses one of the five action points of the European Commission (‘EC’) FinTech Action plan, namely ESMA’s mandate ‘to map current authorising and licensing approaches for innovative FinTech business models in Europe’. ESMA conducted two Surveys to gather evidence from national competent authorities (NCAs) on the licensing regimes of FinTech firms in their jurisdictions. The first conducted in January 2018, sought to identify potential gaps and issues in the existing EU regulatory framework, assess how the existing national regimes diverge and, if identified, propose recommendations to adapt the EU legislation to the emerging innovations. The second, launched one year later attempted to identify the ways in which NCAs employed the concepts of ‘proportionality’ and ‘flexibility’ when licensing FinTech firms. The Surveys confirmed that NCAs do not typically distinguish between FinTech and traditional business models in their authorising and licensing activities since they authorise a financial activity and not a technology.
The term Financial Technologies or “Fintech” is used to describe a variety of innovative business models and emerging technologies that have the potential to transform the financial services industry:
- Innovative Fintech business models typically offer one or more specific financial products or services in an automated fashion through the use of the internet. By doing so, they unbundle the different financial services traditionally offered by service providers -- incumbent banks, brokers or investment managers. For example, equity crowdfunding platforms intermediate share placements; peer-to-peer lending platforms intermediate or sell loans; robo-advisers provide automated investment advice; and social trading platforms offer brokerage and investing services.
- Emerging technologies such as cognitive computing, machine learning, artificial intelligence, and distributed ledger technologies (DLT) can be used to supplement both Fintech new entrants and traditional incumbents, and carry the potential to materially change the financial services industry.
The Ethics Guidelines for Trustworthy Artificial Intelligence (AI) is a document prepared by the High-Level Expert Group on Artificial Intelligence (AI HLEG). This independent expert group was set up by the European Commission in June 2018, as part of the AI strategy announced earlier that year. The AI HLEG presented a first draft of the Guidelines in December 2018. Following further deliberations by the group in light of discussions on the European AI Alliance, a stakeholder consultation and meetings with representatives from Member States, the Guidelines were revised and published in April 2019. In parallel, the AI HLEG also prepared a revised document which elaborates on a definition of Artificial Intelligence used for the purpose of its deliverables.
CE - Behavioural study on the digitalisation of the marketing and distance selling of retail financial services
The digitalisation of retail financial services is developing rapidly and has transformed this market. Consumers are increasingly purchasing credit, banking, investment, insurance and other financial products online, mainly from domestic providers but also cross-border. This has led established players to adapt their marketing and business practices to this changing market and also to the emergence of new players with new business models (e.g. fintech and insurtech firms). The European Commission recognised in its Consumer Financial Services Action Plan that innovative online services are transforming how people use financial services, representing an opportunity for all Europeans to benefit from a deeply integrated Single Market for retail financial services. However, while digital technology can make it easier to reach consumers in all Member States, this alone cannot address all the obstacles to a single market for financial services. Hence the Action Plan acknowledges that more must be done to increase consumer trust and empower consumers and to support the development of digital retail financial services.
NOCASH - Commission launches the European Forum for Innovation Facilitators (EFIS) with the aim to create a favourable environment for Fintech start-ups
The European Commission and the European Supervisory Authorities (ESAs) are launching the European Forum for Innovation Facilitators (EFIF), “with the objective to improve cooperation and coordination in support of the application of new technological developments in the EU financial sector”, according to the press release. Innovation facilitators usually take the form of ‘innovation hubs’ and ‘regulatory sandboxes’. Innovation hubs provide a dedicated point of contact for financial firms to raise enquiries with competent authorities on financial technology (FinTech) issues. Regulatory sandboxes are schemes set up by competent authorities to provide firms with the opportunity to test innovative products and services related to the financial sector. Valdis Dombrovskis, Vice-President in charge of Financial Stability, Financial Services and Capital Markets Union, said: “There are 21 innovation hubs and five regulatory sandboxes in the EU. By creating the European Forum for Innovation Facilitators, we aim to create a favourable environment for Fintech start-ups to scale-up and flourish in Europe. Innovation is a key component of the engine supporting the economic growth of the EU”. The EFIF is intended to provide a platform for participating authorities to collaborate and share experiences from engagement with firms through innovation facilitators. The establishment of EFIF follows up on the 2019 ESA’s joint report on regulatory sandboxes and innovation hubs and it is in line with the Commission’s FinTech Action Plan’s objectives to support the competitiveness of the European financial sector and contribute to make Europe a hub for future innovation in FinTech. The ESAs and National Competent Authorities will be the members of the EFIF. In addition, and on ad-hoc basis, representatives from third-countries’ competent authorities will be invited to participate in the EFIF meetings.
Cyber risk is a growing concern for institutions, individuals, and financial markets. In less than five years, it has surged to the top positions in the list of global risks for business. The increasing number of cyber incidents, the continued digital transformation and new regulatory initiatives in the European Union are expected to raise awareness and to boost the demand for cyber insurance. With the stand-alone cyber insurance market located predominately in the United States and only a fraction of the total market in Europe, available reports and surveys focus on the global or the US insurance market. So far, very little attention has been paid to the European market. One of the key findings of the report confirms this fact, namely the need for a deeper understanding of cyber risk, which is a core challenge for the European insurance industry. This challenge generates or fosters other challenges, such as improper treatment of non-affirmative risks and difficulties to quantify risks, among others. The outcome of this structured dialogue with the industry provides useful insights on the functioning, growth potential, challenges and risks of cyber insurance in Europe in the context of the expected growing importance of cyber insurance in the portfolios of (re)insurers. Although based on a limited sample, the report addresses important key findings, such as the clear need for improved understanding of cyber risk. This report is the first attempt by EIOPA to enhance the level of understanding of cyber risk underwriting with a focus on the European insurance market. Further work in this field is necessary. Therefore, EIOPA included a combination of qualitative and quantitative questions on cyber risk in its 2018 Insurance Stress Test.
Dl. Steven Maijoor, președintele ESMA, a ținut un discurs legat de tehnologia financiară, concentrându-se pe aspecte privind schimbările tehnologice din piețele de capital, inovația financiară și provocările și oportunitățile pe care tehnologiile le oferă reglementatorilor.
Consultanța automatizată contribuie la dezvoltarea incluziunii financiare, clienții putând să își planifice finanțele.
Pe măsură ce serviciile financiare se mută în mediul online, apare problema legată de discriminarea prețurilor deoarece companiile pot personaliza prețurile în baza informațiilor despre consumatori.
Un alt mod prin care tehnologia afectează piețele de capital este prin intermediul inteligenței artificiale folosite pentru a prezice mișcările de preț.
O aplicare diferită a inteligenței artificiale este sub forma tehnologiei de supraveghere (SupTech), reglementatorii folosind algoritmi pentru a studia comportamentul de tranzacționare și pentru a detecta abuzul de piață.
The future of insurance… From challenging the norms of legacy to reinventing traditional customer journeys, insurance is changing. The forces that are causing this change, and overall consumer life, are a combination of AI, IoT and predictive analytics. While there is a swell of new disruptors looking to cement their position in a changing landscape, insurance companies have a new chance to rethink, reinvest and reinvent their existing business models and create insurance products and proposals that fit the modern digital age and offer new levels of value for their customers. The latest version of the Future of General Insurance Report has been constructed to depict this swell and better understand how it’ll continue to disrupt the industry – revealing crucial insights that cannot be ignored.
The eighth Allianz Risk Barometer is the biggest yet incorporating the views of a record 2,415 respondents from 86 countries. The annual corporate risk survey was conducted among Allianz customers (global businesses), brokers and industry trade organizations. It also surveyed risk consultants, underwriters, senior managers and claims experts in the corporate insurance segment of both Allianz Global Corporate & Specialty (AGCS) and other Allianz entities. Respondents were questioned during October and November 2018. The survey focused on large and small- to mid-sized enterprises. Respondents were asked to select industries about which they were particularly knowledgeable and name up to three risks they believed to be of the most importance. Applicable respondents could provide answers for up to two industries meaning there was a total of 2,882 survey responses from 2,415 respondents.
The Internet of Things (IoT) – devices that are connected to the Internet and collect and use data to operate – is about to transform society. Everything from smart fridges and lightbulbs to remote sensors and cities will collect data that can be analysed and used to provide a wealth of bespoke products and services. The impacts will be huge - by 2020, some 25 billion devices will be connected to the Internet with some studies estimating this number will rise to 125 billion in 2030. These will include many things that have never been connected to the Internet before. Like all new technologies, IoT offers substantial new opportunities which must be considered in parallel with the new risks that come with it. To make sense of this new world, Lloyd’s worked with University College London’s (UCL) Department of Science, Technology, Engineering and Public Policy (STEaPP) and the PETRAS IoT Research Hub to publish this report. ‘Networked world’ analyses IoT’s opportunities, risks and regulatory landscape. It aims to help insurers understand potential exposures across marine, smart homes, water infrastructure and agriculture while highlighting the implications for insurance operations and product development. The report also helps risk managers assess how this technology could impact their businesses and consider how they can mitigate associated risks.
Abstract—Blockchain technologies, such as smart contracts, present a unique interface for machine-to-machine communication that provides a secure, append-only record that can be shared without trust and without a central administrator. We study the possibilities and limitations of using smart contracts for machine-to-machine communication by designing, implementing, and evaluating AGasP, an application for automated gasoline purchases. We find that using smart contracts allows us to directly address the challenges of transparency, longevity, and trust in IoT applications. However, real-world applications using smart contracts must address their important trade-offs, such as performance, privacy, and the challenge of ensuring they are written correctly. Index Terms—Internet of Things, IoT, Machine-to-Machine Communication, Blockchain, Smart Contracts, Ethereum.
Insurance Europe's response to a consultation by the European Commission’s High-Level Expert Group (HLEG) on draft guidelines for trustworthy artificial intelligence (AI).
Insurers provide feedback on draft EC guidelines on ethical design of AI. Insurance Europe has published its response to a consultation by the European Commission’s High-Level Expert Group (HLEG) on draft guidelines for trustworthy artificial intelligence (AI). Insurance Europe welcomed the HLEG’s acknowledgement that Europe already has regulation in place that applies to AI. Insurance Europe stressed that the insurance industry is a highly regulated and supervised sector at national and European level. Consequently, a responsible use of trustworthy AI by insurers is already guaranteed. Moreover, for society to be able to enjoy the benefits of AI, Insurance Europe said it is crucial for the HLEG to ensure that any rules relating to AI design, development and deployment are future-proof and innovation-friendly, and allow European companies to be global competitors. Finally, Insurance Europe said it would welcome the opportunity to further comment on the final draft guidelines.