No ‘Unregulated Open Field’ for Fintechs, French Watchdog Warns

  • France’s AMF creates division dedicated to fintech rules
  • Automated financial advice, blockchain, among priorities

Financial technology companies: the industry rules apply to you too, and the French markets watchdog wants to make sure you’re respecting them.

“We don’t want to give fintechs the illusion that they’re operating in a totally unregulated open field,” Franck Guiader, who heads a newly-created division for innovative services at the Autorite des Marches Financiers in Paris, said in an interview. “Existing European regulation may already apply to part of their businesses and if there are loopholes regulation is likely to evolve.”

Automated financial advice, blockchain and big data are among the priority fields for the AMF as it seeks to draft and influence regulation for new financial services in Europe and globally, said Guiader.

The AMF is not the first European regulator to zoom in on fintechs. The U.K.’s Financial Conduct Authority has an innovation hub to hand-hold companies through the introduction of new services to the market, and it’s also opening up another program for testing new ideas

The move by the AMF is a “positive sign,” said Julien Maldonato, director for the financial industry at Deloitte in Paris. It means startups will benefit from regulatory coaching as they develop, reducing the risk of “emergency” disciplinary measures once they’re already established, he said.

Global fintech funding was about $22.3 billion last year, 75 percent more than the year before, according to Accenture. While France made up only a small fraction of that, with $189 million, it’s growing faster than the global average and playing catch-up to its neighbors Germany and the U.K. Of Europe’s $1.5 billion in fintech funding last year, the U.K. made up $962 million and Germany $193 million, according to a report by KPMG.

“Perhaps in case of Brexit the Paris market may become more interesting, and regulators desire to be attractive,” said Deloitte’s Maldonato.

Surprise Resignation

Debate about regulating new financial services is flaring up after LendingClub Corp. chief executive officer Renaud Laplanche’s unexpected resignation last month, as the U.S. peer-to-peer lending platform disclosed internal-control lapses and abuses related to the sale of some of its loans. Companies are also asking watchdogs more questions, and some are calling for a clearer framework as they develop new services.

While the AMF will look closely at new financial services whether they’re coming out of a startup’s lab or a well-established bank, it will also work directly with entrepreneurs to prepare them for how the framework is likely to evolve, Guiader said.

“We want to accompany entrepreneurs,” said Guiader. It’s about helping them “develop sustainably in the long run.”

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