The European Commission has launched a new platform, with the goal to bridge the gap in discussion between financial institutions and regulators. Marius Galdikas, CEO at ConnectPay, draws attention to some of the long-standing challenges the platform could help address – if regulators are truly reactive and actively join in on the conversation.

June 9, 2022. In April, the European Commission launched the EU Digital Finance Platform with the aim to foster impactful dialogue between digital finance innovators and regulatory authorities. While the European Union is the home for many innovative firms, not all can access the full benefits of the single market. As commissioner Mairead McGuinness outlined in her opening remarks during the launch event, the initiative ‘will create legal certainty for innovators, allowing them to scale up across the EU’, at the same time protecting investors and consumers as well as preserving market stability. 

Marius Galdikas, CEO at ConnectPay, an online banking services provider, says a close-knit dialogue between financial institutions and regulators could give an extra push to European innovators, enabling to tackle certain issues quicker and streamlining new product launches. That said, it would only be possible if regulators join in the same capacity as other market participants.

“The platform could become home for open and transparent discussions regarding any future initiatives. This could put Europe at the forefront of developing digital finance. However, the key moment to note is that regulatory authorities should be actively participating in the conversation,” he said. “From where I stand, fintech players have always wanted to share their insights first-hand, which could propel the market forward. To have a dedicated platform to so would be great — that is, if someone on the other end is actually listening.”

According to Galdikas, the EU digital finance platform could help address some of the irregularities regarding cross-border payments regulation, such as PIS/AIS service implementation. As part of PSD2 directive (which enables Open Banking) third-party financial service providers are allowed access to customer bank accounts, which is facilitated by AIS, Account Information Service, alongside PIS – Payment Initiation Services.

However, depending on the country, these policies are interpreted differently. For instance, when enabling PIS, some banks omit requirements for detailed personal data, such as Name, Surname, or IBAN, while others require both AIS and PIS implementation. Moreover, in many cases, one service cannot work without the other, yet they are still often regarded as two different licenses.

“The absence of a unified approach towards this hinders API roll-out, meaning, financial institutions are oftentimes hands-tied when it comes to scaling their services across the single market. This is an issue we’ve been facing as well. Consequently, it prevents the presence of a truly open financial service ecosystem,” Galdikas comments.

“This is only one of the examples illustrating the currently fragmented regulatory landscape,” he added, noting that a much more in-depth discussion needs to start to fill in some of the gaps — and the EU Digital Finance platform could be the basis for it.

Recently, another European Commission-supported initiative — the European Payments Initiative — with similar goals of unifying the fragmented landscape, floundered as it lost half of its member banks. As for outlining potential pitfalls regarding the Digital Finance Platform, Galdikas emphasizes the negligence to involve key players.

“Building a strong community on the platform will be one of the defining factors of its success. As I’ve mentioned before, it’s vital that regulators take the lead and, even more, draw attention to ‘hot’ topics that the fintech community — or other financial services professionals — could respond to,” comments Galdikas. “At the moment, the platform’s capabilities are still more MVP-like, so it will be interesting to follow how it evolves further and builds a productive dialogue amongst market players.”