Don’s Blog: Regulate, set, GO!

Don’s Blog: Regulate, set, GO!

Don’s Blog: Regulate, set, GO!

With “Prinsjesdag” (Little Princes day – the official opening of the Dutch Government’s working year, with presentations of annual budgets and a speech from the Monarch) just around the corner – I felt like it was a good time to reflect on our role towards policymakers and governments.

We’ve never felt comfortable with our network being lumped in with lobbyists, special interest groups – even an industry association felt too confining. As an open, innovative ecosystem with an extremely broad member base, needs and opinions for specific regulations and policy are so diverse, spanning across the full financial industry and beyond. Nevertheless, the call from our members to be more active towards policymakers and regulators is getting stronger. I would like to invite you to help us solve this challenge and step up in a meaningful way.

Our role traditionally encompassed bringing everyone in the ecosystem together, to learn about the latest developments, share insights and discover potential to co-operate. For that purpose, we have always shared our knowledge and connected our members to policymakers and regulators whenever the opportunity arose. However, fintech – or tech and digitization in general, do not get the attention they should with policymakers. How do we change that?

One way in which we believe we can do that is highlighting the potential and need for public-private sector collaboration. That is why we created our 5 themes for 2019, with a special emphasis on relevance to society. If we can show how fintech and financial services, in general, are contributing to societal challenges that are top of mind with policymakers – economic growth, social inequality, sustainable economy, reducing financial distress and even the operations of tax collections – we should be able to spark interest in an open, productive dialogue. Through this, we hope to show policymakers that- if regulated well – financial technologies are a very powerful set of tools for society, the economy, and people. Working together is key to building a single and connected digital economy.

In such an economy, the key conclusion is that data is everything. The current regulations assume that financial data is more sensitive than other data. We need to rethink that idea. Essentially, people should have the choice to decide whether their documents, their personal profile, their religion, their pictures or their financial transactions are more private or sensitive. In other words, all data needs to be treated equally, as we do not know – until we ask – how sensitive or private the data is. Ideally – and it is feasible – we would not share private data like we do today at all! We can overcome having to share data if we work together in a framework that allows (or enforces) us to obtain and use only the data we need. This means getting access too much less than having access to your full profile. Think about age validation as the simplest form: you don’t need anyone’s birth date if a trusted party – like a notary or a bank – can validate that you are over a certain age or have reached the age of majority.

The discussion about data also brings me to my final remarks around the five themes I want to raise, to get everyone – policymakers included – to think beyond compliance. Our society – or at least politics – has become so risk-averse that we are stacking rule on rule to make sure risks are eliminated. Especially consumers – citizens – are to be protected by all means. But these same policies also make it harder for aspiring entrepreneurs to starting innovating & participating in the economy, as there is no such thing as an opportunity (or return) without risk. Naturally, the mandate for regulators to ensure protection must not be swept aside and we must continue to carefully assess potential financial illiteracy, information and power asymmetries in a variety of circumstances for the benefit of the consumer. However to eliminate all risks is not realistic, nor healthy if the goal is to create an innovative, competitive market, and therefore the assumed responsibility on the shoulders of the public sector is becoming too big. We have to educate people that the world is full of risk and how they should take it with care. This might be a political risk, but it is time we take it. Then we can also get rid of all the tick-the-box exercises and talk about how companies should – ethically – deal with their customers which have become familiar scenes in compliance and reporting departments across the board.

While it is certain not all hurdles found on our road to a fully integrated digital economy can be taken easily, I have a created a list of things we would like to put on the agenda for policymakers and regulators.

How is fintech changing requirements for policy:

  • Technological Agnosticism – The rapid pace of innovation coupled with multi-channel deployment methods mean we are moving at a faster pace than ever before. We need to look at the protocols and mandatory processes that might prevent innovation – no matter in what technological field they might present.
  • Risk vs. Rule-based approach – Parties that play a role in the value chain are getting smaller and smaller on average. This demands regulation that is proportionate to the size and actual risks in the company, more based on activity and transaction volume than employee or turnover size.
  • Holistic Regulation – Industry borders are fading and we need structured policies and regulations for one digital ecosystem – across policy departments – with many financial functions or services. Furthermore, there is an increased diversity in roles in the ecosystem and the current definitions of types of companies is not sufficient.
  • Supply chain liability – Operational dependency is heavily increasing because co-operation has become so easy, driving specialization on most functions. This requires a network – value chain – approach to regulations.
  • Enhanced Internal Market – The EU should continue to operate and strive to improve as one single market – we must keep pushing for the next level CMU – and strive to unify in one digital economic union.
  • Policymakers as pillars of trust – Policymakers need to look at their own role to (potentially) bolster public trust in financial services, as a negative stance on their end has large consequences towards trust in the industry, as advocated by a recent publication of the OECD, which makes an interesting read.

 

Specifically for the Netherlands:

  • Capitalizing on the Digital Highway – The Netherlands is one of the most digitally advanced societies in both digital infrastructure and commerce – we need to make the digital economy part of the innovation agenda and general economic policy.
  • Capitalizing on financial expertise – such as payments, capital markets, insurance – cyber security, data and identity governance spearheads of research and innovation and support a national entity to concentrate knowledge and co-ordinate public private sector co-operation.

 

Please let me know what you would like to change or add. Our voice is your voice and as such, I hope you let us know what you think!

All the best!
Don

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