FinTech: Single market ambitions

European citizens stand to benefit greatly from a genuine single market in retail financial services, writes Alain Cadec.

Alain Cadec | Photo credit: European Parliament Audiovisual

By Alain Cadec

02 Apr 2019

In December 2015 the European Commission released a Green Paper on retail financial services. The aim was to determine the barriers preventing emergence of a single market for retail financial services.

A huge stakeholders consultation was launched, including insurance companies, banks and FinTech as well as consumers.

After 18 months, the Commission released its Action Plan on retail financial services. This set out twelve measures covering the insurance, banking and FinTech sectors.


It was clear that an important amount of work was required in each of these sectors.

At the same time, a great deal of legislation concerning the retail sector had recently been adopted or was about to be implemented in the Member States, including the Markets in Financial Instruments Directive (MIFID II) and the Insurance Distribution Directive (IDD).

It was obvious that the sector needed time to adapt to these new pieces of legislation. However, rapid action was required.

Indeed, new technology has already impacted the retail financial services sector. Most banking products or insurance products are now available online, meaning the more traditional stakeholders are evolving towards more technology-orientated approaches.

“New technology has already impacted the retail financial services sector. Most banking products or insurance products are now available online”

At the same time, new types of actors have entered the financial scene in the last ten years - FinTechs.

FinTechs have been able to adjust rapidly to this new technological paradigm and create new types of platforms to help consumers access retail financial services.

The United States and China have embraced the opportunity to become leaders in FinTechs, while Europe has been a latecomer.

Indeed, the European retail financial services market is too fragmented to be a leader in this type of business. Many important obstacles remain for the EU before it can become a single market for retail financial services.

The most important are the disparities between national taxation and social policies regimes. With 28 different taxation and social regimes, it is difficult for businesses to evolve on a pan-European stage.

Even where technology helps make financial services more accessible, it cannot do the job on its own. There are too many variables in taxation and social regimes to determine the price of a retail financial service or product.

For example, the taxation on saving accounts which differs between Member States, makes the price different in each country.

Without harmonisation, or at least a convergence between national taxation and social policies, we will face difficulties in creating a genuinely competitive retail financial services sector.

Given the competencies that the EU currently possesses, some improvements can be achieved; however, substantial changes will be difficult to reach. The problem is that the EU might miss the FinTech train and at the same time lose out on a huge amount of financial opportunities.

For the time being, FinTechs still have to be regulated in order to ensure there is a level playing field with the more traditional actors and, of course, to ensure that consumers are well protected.

A real single market for retail financial services could emerge if substantial concessions are made by Member States on the future integration of the European Union.

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