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Despite the US leadership pushing for an increasingly deregulated financial services market, some payments players and politicians in Europe are adamant that standards being watered down is not the way to boost growth.
Donald Trump’s second term as US president has reinforced many of Europe’s concerns about its payments and fintech market.
There is a sense that the region’s retail payments have become largely outsourced to US schemes that are light-years ahead when it comes to consumer awareness, resources, and mechanisms to counter issues such as fraud.
As one central banker recently quipped at a conference, Europe is at “10 past midnight” when it comes to creating its own solution.
The European Card Payment Association, which represents local schemes in Europe, has put out a paper calling for European payment sovereignty, considering current geopolitical issues, particularly the frostier relationship between Europe and the US.
The problem for Europe’s payments and fintech industry is that it is more challenging to scale, and growth has become hard to come by.
A problem with regulation?
The Trump administration’s approach has flared anxieties in Europe’s fintech community about how it can effectively scale while also navigating at times rigid and prescriptive regulation.
However, the mood at Money 20/20 does not appear to be in favour of a full watering down of European payments regulation.
Instead there is a sense that the region should be regulating smarter – an idea gaining traction in both the EU and UK markets.
“Getting rid of checks and balances is a really bad idea,” warned Constantijn van Oranje, special envoy at TechLeap, speaking on a panel at Money 20/20 Europe about how Europe can respond to the US deregulation push.
The European start-ups advocate instead suggested that having “solid regulation that is predictable and long term is a very good idea.”
“We should look more at how it is implemented and enforced, and there is a massive amount of improvement that would be able to make it much more user friendly. “
He pointed out that not every organisation can afford huge compliance departments, but that there is a lot that can be done to “automate stuff that is currently still very analogue”.
Luke Charters, a UK parliamentarian in the governing Labour Party (and a former fintech employee), said that there is a need to “regulate for growth”.
“This means regulators stepping back a bit and removing some of the red tape,” he acknowledged. “But it also means the regulator stepping up in some areas and taking a leadership role to set standards.”
The lawmaker said that the “cost of compliance” should be reduced, but added that this cannot happen at the same time as “just stepping back”.
This sentiment appears to be resonating across Europe currently – and beyond just businesses or lawmakers keen on innovation.
For example, as covered by Vixio, the Polish Financial Supervision Authority (PFSA) has made recommendations to the European Commission on amendments to several key pieces of EU regulation in a bid to reduce some of the compliance burdens and obstacles that firms currently face.
Finding seed money
Marieke Flament, an angel investor at Project Europe, which helps start-ups and founders, has expressed an alternative view, suggesting that regulation is less of an issue than a lack of capital for firms to utilise.
“As a founder, it is easy to find seed money in the first round, but it is harder to find money to take the next rounds,” she said.
“We need to work out how to find that in Europe.”
