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

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

The UK Financial Conduct Authority (‘FCA’) released on 20 February 2018 a Call for Input ‘on the use of technology to achieve smarter regulatory reporting’ (‘Call for Input’), in which it seeks views on the use of technology to make regulation more efficient and to reduce the regulatory burden on firms. / read more

In 2017, the US Securities and Exchange Commission (‘SEC’) formally asserted its regulatory enforcement power over the purchase and sale of cryptographic tokens, with action taken in this area including a report involving the initial coin offering (‘ICO’) of DAO tokens by ‘The DAO,’ and at the end of the year enforcement action against a number of organisations involved in ICOs. Jennifer Achilles, Kari Larsen and Michael Selig of Reed Smith discuss in detail how the SEC’s approach to ICOs has evolved during 2017, and the lessons therein for cryptographic token issuers. / read more

After some months of consideration and debate, particularly around the proposed ban therein on ‘screen scraping,’ the European Banking Authority (‘EBA’) has adopted a set of regulatory technical standards (‘RTS’) ‘for strong customer authentication[,] and common and secure open standards of communication.’ The RTS specify the ‘common and secure open standards of communication’ that banks, PISPs and AISPs must use, when they are communicating information for the purposes of the revised Payment Services Directive (‘PSD2’). Chris Finney, Partner at Fox Williams, analyses the RTS and the requirements and potential issues for banks, AISPs, PISPs and card issuers, particularly for those in the UK, given the context of Brexit. / read more

The UK’s Financial Conduct Authority (‘FCA’) published on 15 December 2017 its feedback statement on Distributed Ledger Technology (‘Feedback Statement’), following its Discussion Paper on distributed ledger technology (‘DLT’) of April 2017, which sought to create a dialogue with industry on the development of DLT in the markets the FCA regulates and DLT’s impact on financial services (‘Discussion Paper’). The Feedback Statement comments on the responses received as a result of the Discussion Paper, and the FCA highlights that, among other things, it has received support for its ‘technology-neutral’ stance and that respondents felt that the current rules can accommodate DLT use by regulated firms, without changes being required. As a result, the FCA is to continue to monitor developments in this area without further regulation at present. / read more

Andrew Galvin and Kate Montano of HWL Ebsworth Lawyers describe here their views on the Enhanced Regulatory Sandbox currently proposed by Australia’s Department of the Treasury. Andrew and Kate believe the Enhanced Regulatory Sandbox corrects many of the shortcomings of the current regulatory sandbox; most critically, payments businesses would be able to access the Enhanced Regulatory Sandbox to issue their own facilities, and that the Enhanced Regulatory Sandbox would, functionally, acclimatise FinTechs to, and ease their passage into, the Australian financial services regulatory environment. However, in this article Andrew and Kate also outline why they believe policymakers in Australia have yet to engage in ‘blue sky thinking’ on the appropriate regulation of FinTech and payments businesses. / read more

The UK’s Financial Conduct Authority (‘FCA’) published in October 2017 a summary of the first year of operation of its regulatory sandbox, highlighting the concerns it has had as well as the sandbox’s successes, as Sue McLean and Nina Moffatt of Baker McKenzie discuss. / read more

It has been five years since Italy’s regulation on crowdfunding was enacted, and during that time the regulatory regime has been modified to meet the concerns faced. In the past few months, the Italian supervisory authority CONSOB has published for consultation a revised version of the crowdfunding regulation. Jeffrey Greenbaum and Elisabetta Zeppieri of Hogan Lovells Studio Legale review the evolution of the crowdfunding regulation, the CONSOB’s proposed changes, and the state of the FinTech sector more generally in Italy. / read more

A controversial issue concerns the European Banking Authority’s (‘EBA’) Regulatory Technical Standards (‘RTS’) on Strong Customer Authentication and Common and Secure Communication, to which the European Commission has now responded by proposing amendments, and specifically the access to customer bank accounts that Account Information Services (‘AIS’) and Payment Initiation Services (‘PIS’) will have. Specifically, the draft RTS would ban access to customer bank accounts via the practice of screen scraping, with dedicated interfaces being the only way to gain such access; the Commission meanwhile has proposed that if such dedicated interfaces fail, there should be a ‘fall back’ option available, which some have suggested would be akin to an enhanced form of screen scraping. Here, Diederik Bruggink, Senior Adviser Payments at the European Savings and Retail Banking Group, provides his opinion on the debate, arguing that dedicated interfaces are the only viable option. / read more