At the Paris Fintech Forum, a panel discussion moderated by Edward Robinson (Senior Writer, Bloomberg News) brought together François Villeroy de Galhau (Governor, Banque de France) and Olivier Guersent (Director General, for Financial Stability, Financial Services and Capital Markets Union, European Commission). The experts notably exchanged around the topics of data flows, PSD2, cybersecurity and the entry of new players.

The first reaction was the one of François Villeroy de Galhau who underlined that it was actually not obvious to combine regulation with innovation. To do so, the Banque de France discusses and exchanges with several startups. He added: "we do not only have to talk to innovators, but have to innovate ourselves, which is not conventional for most central banks. We created a lab 2 years ago, and appointed a Chief Digital Officer. As a result, we were one of the first central banks to develop a Blockchain. Lately we have also created a Chief Data Officer position, because data is the real treasure in today's finance industry". The Governor of the Banque de France also explained how the central bank is involved in Artificial Intelligence: it published a discussion paper sharing its main findings, from the development of complex algorithms to the question of governance. This year, the Banque de France is working on three concrete fields to test and learn: AML (Anti Money Laundering), the validation of internal models and tasks, and finally customer relationship and marketing.

Olivier Guersent then reminded the audience that the European Commission's perspective was slightly different as its mission is to make sure regulation is consistent across Europe. "As we are still at the beginning of disruption, we need to make a joint effort. As a matter of fact, the regulatory framework that was drafted years ago is not adapted to the tech world anymore. We are therefore reviewing all the pieces of regulation to make sure it is fit for purpose in today's environment," he explained. The expert also added that a balance was needed between digital, regulation and consumer needs: there is a constant calibration to allow innovation to thrive…but also to keep the market integrity safe!

 

Payment Services Directive 2

François Villeroy de Galhau and Olivier Guersent then tackled the trendy topic of open banking and PSD2. For instance, in only one year, the European Commission has received more than 200 applications for licenses. In France, the central bank granted authorizations to 7 new players, and has now its eye on September 14th and the final deadline to comply with PSD2’s Regulatory Technical Standard (RTS).

Yet, both experts highlighted that these actors need to deliver on the security side: "if they don't, innovation will lose. Supervisors are working with startups on that specific issue, because joint work in the best way to deliver in the future".

 

Web giants and financial services

The discussion ended with the Bigtech trend and the fact that web giants are about to enter the finance and banking worlds by notably providing payment solutions through messaging apps and social media. "In France, neo and online banks already captured 6% of the customers, showing great acceptance. And as we see it in the US and in China, the tech giants will be the biggest disruptors in the years to come as they use IT, notably cloud and scoring," underlined the Governor of the Banque de France. Supervisors are facing an important challenge and need to go beyond classical financial regulation as they now have to deal with data protection, cybersecurity, competition and trust. To succeed, international cooperation is needed.

Finally, and according to Olivier Guerset, "tech giants can roll over their services all over the world very quickly. They capture the value added and might even exclude other market participants. The first set of issues concerning privacy and compliance has been tackled with the implementation of the GDPR, and hopefully, Europe and the rest of the world will move in the same direction".

 

Alexandre Keilmann

Photo: Steven Reti