Speed Read

On 23 March 2018, CONSOB published the first of eleven volumes in a series dedicated to an analysis of the impact of the digitalisation process on financial services (the Series).

The initiative was launched in September 2016 with the start of the applied research project "Fintech: digitalisation of financial intermediation processes". The study, completed in November 2017, was developed in collaboration with some of the most prestigious Italian universities through the individual contributions of around 70 scholars.

The research highlights that given the increase in the competitive potential of Fintech and the likely effects of disintermediation, or the advent of new forms of intermediation in the financial industry, the changes brought about by the digital revolution and the application of technology to financial services cannot be considered to be a niche phenomenon.

Background

At the "Annual Meeting with the financial market" held on 8 May 2017, CONSOB stressed that the increasingly pervasive presence of information technology and artificial intelligence in finance has triggered processes of profound transformation, which within a few years could radically change the appearance and landscape of financial markets as we have always known them. It has been highlighted how the boundaries between intermediaries, issuers and markets, already blurred by the MiFID / MiFID II regulations, tend to vanish definitively. The conceptual and legal apparatus used today for financial regulation, according to CONSOB, will soon be obsolete. On the other hand, innovation presents, as always, opportunities, but also risks.

Nowadays, according to the President of CONSOB, the Fintech network operates in a regulatory limbo which works in its favour. It follows that regulation will necessarily have to adapt gradually and proportionately, without hindering innovation.

The aforementioned matters were also addressed by CONSOB and the Bank of Italy during the hearing at the Finance Committee of the Chamber of Deputies in November 2017, as part of the fact-finding investigation into issues related to the impact of technology on the financial, credit and insurance sectors. In this context, Fintech was highlighted as being an integral part of a more general change in the structure of the economy towards the digitalisation of exchanges and relations which:

1. represents a new way of responding in terms of maximum flexibility to the needs of users of financial services;
2. is a cross-sectoral phenomenon on a global basis; and
3. has the advantage of simplifying financial intermediation activities.

Further initiatives aimed at encouraging the development and comparison of the Fintech theme have included: the creation of the Fintech District of Milan, in whose inauguration some representatives of the institutions, CONSOB, and the Bank of Italy, through the activation of the innovation hub, participated; the "Fintech Channel" on the Bank of Italy website, which aims to encourage comparisons with market operators, making available an easily accessible route and a proactive environment; and the creation of a Fintech task force in CONSOB.

The Series

The Series is organised in different logical-thematic volumes.

1. The first volume: "The development of the Fintech. Opportunities and risks for the financial industry in the digital age", which has already been published, analyses the operations of Fintech companies by providing details of the different business models and of some aspects of the European debate on regulation.
2. The second volume: "Fintech and the legal framework issues", will focus on the relevant legal aspects involved in the provision of digital services.
3. The third volume: "Marketplace lending: towards new forms of financial intermediation" will describe the various microstructural configurations of the financing mechanisms implemented through digital platforms.
4. The fourth volume: "Equity-based Crowdfunding: operational and regulatory aspects", will develop a comparative analysis of the regulatory regimes existing in the European Union.
5. The fifth volume: "The digitization of advice on financial investments", analyses the problems arising from automated consulting.
6. The sixth volume: "DLT and Securities Market", will describe the use of Distributive Ledger Technology in the negotiation of financial instruments.
7. The seventh volume: "Fintech: the international debate on regulation and the measures adopted", will look at how the most important themes of the Fintech phenomenon are discussed in international forums, through a comparative analysis of the most important regulatory aspects implemented to support the experimentation and innovative development of Fintech companies.
8. The eighth volume: "Fintech and Financial Inclusion", the issue of the inclusion or exclusion of people and businesses from the world of digital services is expected to be covered.
9. The ninth volume: "Financial Data Aggregation and Account Information Services", will analyse the role of the Financial Data Aggregator in the retail financial services market.
10. The tenth and the eleventh volumes, respectively "Robo advice, perception of risk and trust: experimental evidences" and "The evolutionary profiles of robo advice between relationship and algorithms: a qualitative survey", will illustrate the results of a laboratory experiment aimed at exploring the impact that digitalisation can have on the perception of financial risk and on the propensity of retail investors to make use of the support of an expert in investment decisions.

We will follow the publication of the volumes of the Series with appropriate follow-up on legal and regulatory issues.