Last Tuesday March 8th 2016 the Dutch Minister of Finance Mr. Dijsselbloem presented the Dutch government's position concerning the developments in the Dutch FinTech sector. In its letter to the Dutch parliament Dijsselbloem identifies various opportunities and risks, followed by three tracks of policy measures where he sees an increasing role for the Dutch government and supervisory authorities to exploit said opportunities and manage said risks. However, is this enough or should we do more?
Opportunities and risks
Dijsselbloem states that FinTech companies can have considerable benefits for consumers, the business community and the financial stability in the Netherlands. Technologic innovation provided by these new companies may lead to more suppliers of services, a bigger diversity and thus competition in the market. The new suppliers, which have to be innovative to excel, will have to provide better products at a lower price with a focus on customer driven services. According to Dijsselbloem, not being solely dependent on the current banking sector, may also be beneficial for the financial stability in the Netherlands.
These developments also bear some risks according to the Minister. The revenue model of traditional financial institutions is based on providing a total package to its customer. They provide less profitable services to customers in order to sell them also the more profitable services via a package deal. If the current financial institutions are not innovative enough and new FinTech companies are able to persuade consumers in buying the more profitable services from them (at a lower price), this may result in financial instability in the Netherlands. The Minister also points out that the current duty of care (Article 4:24 of the Financial Supervision Act) may not be applicable to the new service providers due to the fact that the current legislation is not directly applicable to these new providers.
Three policy tracks
In order to exploit aforementioned opportunities and manage aforementioned risks, Dijsselbloem identifies three tracks of policy measures for the government and supervisory authorities to focus on.
- Tackle the bottlenecks
Dutch legislation, regulations and supervisory frameworks are not yet equipped for the innovative FinTech businesses. The Minister states that these may have to be altered in order to make way for the new developments. There should also be more clarity with regard to acquiring licenses and permits for the new FinTech companies in order for them to participate on the Dutch financial market.
- Safeguard the safety of financial sector
As mentioned before, according to Dijsselbloem FinTech companies may cause financial instability and other risks. Thus it is important that the new developments should be monitored by supervisory authorities, more specifically De Nederlandsche Bank (DNB) and the Netherlands Authority for the Financial Markets (AFM). These two have already stressed that they will raise the subject with FinTech companies and have also brought up privacy related matters for discussion with the Netherlands Authority for Consumers & Markets (ACM).
- Take advantage of business opportunities with regard to Fintech
The Minister states that the Netherlands has to present itself as a country being pre-eminently fit for financial innovation. The manifest by Holland FinTech, of which Van Doorne is one of the four founding members, already points out that the Dutch government wants to create an appealing FinTech ecosystem in this country. Dijsselbloem also mentions that not only the quantity of FinTech companies rises, also the total amount invested in FinTech companies in the Netherlands have expanded.
Is it enough?
Although we applaud the Dutch government's intentions, more considerable efforts seem necessary to ensure that the Netherlands becomes an important European hub for FinTech developments (in accordance with the aforementioned manifest by Holland FinTech). Especially when Europe does not seem to be able to cope up with FinTech developments in Northern America and Asia.
This week, on March 9th 2016, KPMG and CB Insights presented their report "The Pulse of Fintech, 2015 in Review" stating the results of their global analysis of FinTech venture funding. Similar to the Dutch Minister's statement that the amounts invested in FinTech companies in the Netherlands has expanded, KPMG and CB Insights conclude that the amounts invested Europe-wide have expanded with 28%. However, they also conclude that in 2015 Asia garnered 113% more $50M+ FinTech deals than in Europe and that in Northern America 375% more mega-rounds took place than in Europe. Europe is apparently not able to compete with Asia and Northern America.
Taking into account the above, it is clearly in the interest of Europe and more specific in the interest of the Netherlands that the Dutch government invests considerably in order for the Netherlands to play an important role as the European hub for FinTech developments, to contribute to a secure and trustworthy financial ecosystem and to make sure there is access to the best tools to allow the Dutch economy to grow.
As founding member of Holland FinTech, Van Doorne will continue its increased efforts in making this happen.
For more information, please contact one of the members of the Van Doorne FinTech Team.