New technologies, increased competition and a favourable regulatory environment are among the factors driving innovation across the financial services industry. Major banks and financial institutions are facing increasing competition from FinTechs that offer flexible products through digital banking apps, as well as from tech firms that are also entering the sector. Dr Andreas Fillmann, Partner in the Financial Services Practice and Member of the global FinTech Group at Squire Patton Boggs, provides insight into the opportunities presented by the revised Payment Services Directive (‘PSD2’) and Open Banking for banks and the importance of Application Programming Interfaces (‘APIs’) within this changing landscape. / read more

Financial institutions are investing heavily in technology to improve the onboarding process. But as they digitally transform their processes, many organisations are struggling to accommodate risk and compliance on the one hand, and customer convenience and innovation on the other. Josje Fiolet, Digital Customer Onboarding Lead at consultancy for digital transactions INNOPAY, discusses here how the European Supervisory Authorities, supporting new customer due diligence technologies, have provided a pragmatic guide for organisations considering how to strike the right balance, with the release of their Opinion ‘on the use of innovative solutions by credit and financial institutions in the customer due diligence process.’ / read more

We have all heard the mantra that ‘Brexit means Brexit,’ but what might this actually mean for FinTech firms in the UK? In this article, Rob Aird and Bradley Rice, Partner and Senior Associate respectively in Ashurst LLP’s Global FinTech practice, consider the possible implications for FinTechs, drawing on the findings of the recent report by the European Union Committee of the House of Lords, entitled ‘Brexit: the future of financial regulation and supervision,’ and the implications of HM Treasury’s FinTech Sector Strategy, launched in March 2018. / read more

On 8 March 2018 the European Commission (‘EC’) put forward a proposal for a regulation on crowdfunding service providers (‘Proposal’), which aims to address what the EC views as an underdeveloped market by providing common rules across the EU. The Proposal was released as part of the EC’s FinTech Action Plan, which features 19 steps designed to “harness the opportunities presented by technology-enabled innovation in financial services.” / read more

The Court of Justice of the European Union (‘CJEU’) has handed down two important judgments interpreting the EU Interchange Fee Regulation (‘IFR’) and the revised Payment Services Directive (‘PSD2’). More precisely, the CJEU has confirmed the applicability of the IFR interchange fee (‘IF’) caps to three-party scheme (‘3PS’) cards/transactions that involve an ‘agent’ or a ‘co-branding partner,’ and provided clarity on the extent to which 3PS are subject to Article 35 PSD2 on ‘access to payment systems.’ Scott McInnes, Partner at Bird & Bird, provides analysis of these two important judgments. / read more

On 27 November 2017 the European Commission adopted Regulatory Technical Standards (‘RTS’) on strong customer authentication (‘SCA’) and common and secure communication (‘CSC’), supplementing Article 98(1) of the revised Payment Services Directive (‘PSD2’). The RTS were based on draft standards produced by the European Banking Authority (‘EBA’). The Commission made what it termed “limited substantive amendments” to the EBA’s version of these important RTS, and the Commission’s adopted version has gone forward to the Council of the EU and the European Parliament. The Commission’s amendments have led to some concerns from the EBA, which were expressed by Andrea Enría, Chairman of the EBA, in a letter published on 26 January 2018. Tim Wright, Partner at Pillsbury LLP, explains the process taken in creating the RTS and the EBA’s concerns about the amendments. / read more

Jacqui Hatfield, Partner at Orrick, discusses the European Commission’s draft FinTech Action Plan for the EU, which was leaked in early February 2018; Jacqui comments on what the Action Plan gets right and its omissions. / read more

On 6 February 2018, the Conference of State Bank Supervisors (‘CSBS’) announced that seven US states have reached an agreement to enter into a multi-state compact to standardise key elements of the US licensing process for money services businesses. While still a far cry from a harmonised system, this demonstrates that state regulators have heard the complaints of FinTech companies and others, and are moving to address them. Erin Fonté, Member of the Payments & FinTech Lawyer Editorial Board, and Brenna McGee, both of Dykema, discuss the multi-state compact and its limitations, whilst reviewing the ongoing pursuit of a FinTech charter or a state industrial loan company (‘ILC’) charter as a viable path for entry into the US market. Erin and Brenna believe that ultimately what the CSBS hopes to achieve - even if it has not explicitly said so - is a system of licensing reciprocity like that which currently exists in Europe, which would enable a FinTech company to become licensed in just one state, with the ability to ‘passport’ that licence to all other states under reciprocity. However, despite the progress being made in the US, such state reciprocity remains a lofty goal. / read more

Italy has finalised the implementation of PSD2 into Italian law and at the same time allowed for a weighted average interchange fee under the Interchange Fee Regulation. Andrea De Matteis, Giulia Caruso and Lucia Di Martino of De Matteis Studio Legale analyse here Italy’s approach to implementing PSD2. / read more

The SEPA Instant Credit Transfer (‘SCT Inst’) Scheme, launched by the European Payments Council (‘EPC’) in November 2017, is a major step towards the creation of a standard, pan-European, instant credit transfer solution. While instant payment solutions have been developed in certain EU Member States at a national level, the SCT Inst Scheme aims among other things to avoid fragmentation between how Member States’ own instant payment solutions are implemented and overall to make payments in Europe easier. Chris Martin of Eversheds Sutherland reviews the Scheme, its implementation so far and how it is set to develop in the near future. With the proliferation of payment options, from cards to mobiles, as well as the growing use of digital solutions for payments, consumers’ expectations in terms of timing, ease of use, and accessibility to funds, have become ever greater. The availability of media, news and information at all times and instantaneously, has further driven consumer expectations in terms of the services consumers expect to be available. / read more