Datum: 1 januari 2020
Locatie: Online Holland Fintech Annual Conference
Spreker: Olaf Sleijpen
Thank you for having me here today. I am glad I have the opportunity to reach all members of Holland FinTech at your annual conference. A conference which, out of necessity but also fittingly, takes place in cyberspace. Holland FinTech is a valuable sparring partner of De Nederlandsche Bank. You are critical but constructive, you are creative, and you are inclusive given that you cover the whole Fintech landscape, from start-ups to big banks. We very much appreciate your role. And I would like to congratulate you with the next step in your evolution, the establishment of Holland FinTech as an association. I am looking forward to co-operating with you, also in the future.
Looking at the Holland FinTech website, I was struck by the amount of attention you pay to COVID. And if ever there was a sector that was ready for a pandemic, it is the Fintech sector. Indeed, COVID has boosted digitalization in all areas of life, also finance. In the Netherlands, digital payments have increased spectacularly over the past year, to give you just one example.
Fintech is not the trend of the future, it’s here right now. And at De Nederlandsche Bank, both as a central bank and as a regulator, we welcome it. You ask any economics student what the main driver of economic growth and prosperity is, and she will say: technological innovation. And that also goes for the financial sector. It enables cheaper, faster and more secure services, increased competition and financial inclusion, and thereby enhances peoples’ welfare.
At the same time, fintech raises fundamental questions about the safety, stability and accessibility of the financial system. What role will bigtechs play? With the lines between banks and tech firms becoming more and more blurred, who is responsible for security and financial stability? How do new technologies influence cyber and financial crime? Where are the holes and obstacles in regulation? What does it mean for the level playing field? What do digital currencies mean for financial stability? Can a digital euro help safeguard the public interests in the financial system? And last but not least, there are also social issues involved in digitalization. Not everyone can keep pace with the current tempo of digitization. For vulnerable groups of consumers, like the elderly or low-income earners, digital exclusion is another serious barrier.
It is the task of De Nederlandsche Bank to keep the financial system safe and sound. The key question is: how can we, as regulators strike the right balance between facilitating innovation while containing risks to the financial system? So that households and firms can optimally benefit from the new technologies? It is a delicate balance. Innovation needs room to experiment. But this can sometimes conflicts with our responsibility to limit risks in the financial sector and to ensure a safe financial system.
I know many of you are concerned that regulation might stifle innovation and dynamism in the market. In 2019 the government together with EY conducted a Fintech Census. Respondents regarded the quality of supervision as high and the attention for innovation as positive. At the same time, the licensing process was viewed as costly and drawn out. And you expressed concerns about the level playing field, both at European level and between large and small companies.
I understand your concerns. I know it isn’t fun if you are a start-up wanting to roll out a brilliant new business model in the financial sector and you run into piles of financial regulation that you have to comply with. Regulation that is not always designed for a system in which the lines between the financial and the technology sector are getting more and more blurred.
At the same time, the reality is that the financial sector is a heavily regulated sector. And we all know the regulations are there for a reason. To protect consumers and to ensure a sound and stable financial system, supporting the economy. If you want to be a player on the financial market, then you have to play by the rules. And maybe in Europe our stance seems relatively strict. But let’s not forget: being strictly regulated can also be a selling point internationally.
What can we do as a regulator and as a sector, to accommodate innovation as much as possible within the existing regulatory framework? Let me start by saying something about what we as regulators are doing. And I will end by saying what you could do to help.
First of all, we engage in dialogue with the sector in all kinds of ways. Take for example the iForum, a platform we have created to share thoughts with financial firms about the impact of new technology on the financial system and supervision. Now, we are working together with Holland Fintech to identify obstacles for financial innovation and come up with solutions. Together with the Authority for the Financial Markets, we are also looking how to accommodate innovative experimentation within the existing regulation. With Holland FinTech we also organize the ‘Fintech meets the regulator’ events to address topical developments of mutual interest. And then there is of course the InnovationHub. The InnovationHub is there for all your questions about Fintech and regulation. And it is not just intended for established firms. So please feel free to reach out to us there.
We also use your input to be more adaptive as a regulator. When it is not clear what the rules mean under the new fintech circumstances, or how they should be applied, we look at the underlying objectives of the regulation, and translate them into a set of core principles. Principles that the sector can apply in a way that fits the new environment and leaves space for innovation. While continuing to protect customers and financial stability. This is what we did with the ‘General principles for the use of Artificial Intelligence in the financial sector’ that we published last year.
Many of the questions concerning fintech extend beyond our traditional financial sector knowledge. That is why we also reach out to stakeholders that are perhaps less familiar to us, like for example software developers. And we also keep in contact with other supervisors too. These include data and privacy authorities, and institutions responsible for internet governance. One example is our recent joint initiative with The Netherlands Authority for Consumers and Markets and the Data Protection Authority. It is called ‘futureproof financial supervision’, and involves looking together at obstacles and solutions for Fintech.
And lastly, we have developed a digital strategy to make optimal use of technology ourselves. This will allow us to do our job as central bank and supervisor more effectively and efficiently. We are investing in our digital portals to enable a faster and more efficient exchange of data with supervised institutions. We want to work towards more real-time supervision. And we are investing in the digital skills of our staff members to promote an adaptive and flexible working culture with room for creative ideas.
And I’ll end today with some remarks about what you can do. First of all, stay innovative, dynamic and creative. Those are the forces that drive real progress. Second, I would encourage you to challenge us, but also to try to put yourselves in our shoes. Dialogue is a two-way street. There are still laws that continue to apply - even to cool technology. Dialogue can help you and other stakeholders to better understand what financial stability is about, what is needed to protect it, and what we should do to build an innovative financial system that is safe and sound by design.