The financial ecosystem is continuously evolving, with technologies moving from experimentation to pilot testing and deployment stage (e.g. blockchain, artificial intelligence, internet of things) and new market players entering the financial sector.
ALFI identifies 4 general types of obstacles which prevent the EU Financial Sector from taking more full advantage of innovative technologies. These broad themes are, (1) residual reliance on historical means and modes of authentication (paper based and wet-ink requirements), (2) several similar review processes at an EU level on the matter which may lead to inefficiencies, (3) treatment, use, and control of data within the EU as constrained by the GDPR and (4) digital divide that is excluding some consumers from this ever-evolving innovative technologies (this latter issue may lead to keep historical means of investing (paper subscription form, old people keep on going to their retail bank office).
With regard to the legacy imposition of certain requirements for paper based documentation and manual ‘wet-ink’ signatures to authenticate source, ALFI believes that there is a clear and present need (as shown in the COVID-19 situation) to consistently align the practical acceptance of digitized documents which are authenticated via secure digital means. The current variances of practical application at national levels of the EU regulatory frameworks makes it very challenging for Asset Managers and banks to adopt consistent approaches at a European level. This applies equally to documentation content (what is required) and to documentation standard (in what form is it acceptable, paper/digital).
ALFI fully supports an EU level initiative to create a common direction of travel and lead towards a commonly applied legislative framework within the EU. At the same time, it should be acknowledged that there is a tension to be balanced between the aim for a ‘one-size-fits-all’ strategy, which may not be flexible enough for all industries or accommodate emerging technologies, on the one side and the fact that there are a number of EU level reviews on very similar themes (e.g. ESMA FinTech Action Plan). Alignment of these efforts should be sought in order to better focus our collective efforts and resources while at the same time ensuring the strategy remains industry agnostic and resilient to future disruptive technologies.
ALFI responded to the consultation on 24 June 2020.
© ALFI - Association of the Luxembourg Fund Industry
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