Commissioner for Financial Stability, Financial Services and Capital Markets Union
Ladies and gentlemen,
It's a great pleasure to be here and to have the chance to talk about financial services from the point of view of consumers. It’s good to see so much interest in this work. Not just because of the real economic benefits that more transparency, competition and choice could bring. But because of the way that we could help make consumers’ lives easier across Europe: when they want to save, to insure against ill-health, or to plan for retirement.
So today, I want to tell you about the challenge we've set ourselves in our Green paper, and give you a flavour of the responses to the consultation that we've received so far.
Capital Markets Union
Let me start by putting this aspect of our work into the broader context of the our CMU project. The goal of the CMU is to help money flow throughout the EU to where it's most productive. To connect savings more effectively to growth, to channel investment to projects which need financing, to give companies a greater choice of funding, and to increase the options for people saving for the long term.
So by definition, retail investors and consumers lie at the heart of this project. They do so because they provide the pools of capital the financial service industry needs to invest. So the more we deepen the single market for the financial products that consumers buy, the more investment we can unlock. And of course for them as consumers, we could improve the quality of services and reduce the prices they have to pay.
Green paper challenge
I want consumers across Europe to be able to shop for the product that’s right for them, and for businesses to be able to offer their services to customers wherever they are. And I want financial products to be more portable within the single market, so that when consumers move abroad they can take the products with them that are essential to their financial security. Products like bank accounts, pensions, life or health insurance.
At the moment, we don't have a real single market for consumer financial services. There are many excellent products in Europe’s individual domestic markets. But only a small minority of consumer financial products are sold across borders. Fees vary drastically from one country to the next, and so does the quality of services. The right information often isn't available to consumers who want to shop across borders. And it’s difficult for businesses that want to broaden their reach to sell into other markets without physically setting up shop.
Different risks, legal frameworks and costs explain some of these difficulties. Culture is another reason. But today, in an era of digitalisation, we have an opportunity to think again about this whole area and overcome some of the traditional barriers imposed by bricks and mortar.
Traditional business models are coming under siege from new technology. Mobile and internet banking has changed the way we bank. New transfer services like Transferwise - a company I visited last year - mean that exchanging money is becoming much cheaper across Europe. And new companies are offering saving opportunities in different countries, allowing savers to spread their risk. This change is in full swing. Our challenge is to make the most of it for the benefit of Europe's consumers.
I have approached this project in the way I approached CMU. Talk to the industry. Talk to consumers. Find the practical problems we need to overcome and then work out, step-by-step, how to overcome them. That’s why I published a Green Paper last December. I want to hear from businesses, consumer organisations, governments and individuals about the problems they encounter but also their ideas about how to solve them. So I'm looking forward to hearing the outcome of the discussions you have today, and to receiving more ideas over the next two weeks.
I’m glad to say we’ve already had an excellent response, including through our social media campaign #MyMoneyEU in which you can also still take part. We’ve received nearly 200 responses from across two thirds of Member States and even a few from outside the European Union. 90% of these are from individuals, writing to us in a private capacity. To me, that suggests we’re asking the right questions about the right issues, the ones that people care about.
The responses are clear. Consumers want to have the option to buy products across borders. They want to know what products are available beyond their domestic market. And they want to be able to buy products they understand, from companies that are upfront about what they're selling and what they're charging. These are simple, clear demands to which I want to respond. So I'll be keeping them in my mind's eye when we move to the next phase, as we complete our analysis and decide where action is needed.
As well as responses from individual consumers, we've had good contributions from traditional financial service providers, FinTech companies, consumer organisations and think tanks. I expect more responses from these organisations and national governments over the next two weeks. But so far, these strongly support the idea that the digital transformation of financial services is an opportunity we must seize.
This transformation has been underway for some time, but respondents emphasise that the pace of change has accelerated. Data analytics and machine learning allow companies to offer cheaper and improved services, better tailored to customer needs. Block chains and cloud computing are helping firms improve their international payment processes and reduce costs. Technology is being used across the piece to make services more mobile and more immediate.
So there's a sense that it's incumbent on regulators to understand better the opportunities technology can offer, and to make sure that any rule making is proportionate. That it doesn't choke off exciting new opportunities while managing risks. And that it maintains a level playing field. I share this sense. And I'm pleased to say that our Green Paper had identified many of the issues respondents have emphasised as their priorities.
Let me give you a few examples.
The industry wants more clarity on Know Your Client requirements, to help companies that want to sell at a distance without weakening essential security requirements. Linked to this is a strong support for e-ID and e-signature schemes that enable consumers to be safely recognised when they want to purchase specific financial services. And there's a great deal of enthusiasm for FinTech hubs and regulatory safe spaces - or sandboxes - that allow businesses to test innovative services and business models without having to comply immediately with authorisation requirements.
To reduce administrative burdens, and to make it easier for businesses to offers services across Europe, many respondents believe that cooperation between regulators could be improved. And to maintain a level playing field, there's a call for us to focus on the nature of the services provided, rather than on the type of business that's providing the service.
We'll be looking very closely at all these issues, along with any others that are raised in the responses we'll receive in the coming days. We'll work through the evidence, set out our thinking in spring, and any follow up actions this summer.
I'll be focusing on practical solutions. I won't reach for the rule book unless I have to. Over recent years we passed many laws to increase consumer protection. We've made good progress towards hardwiring transparency into the system. This legislation now needs time to bed in. But we'll keep a close eye on whether we're striking a fair balance between customer and supplier. Costs, like insurance for car rental, need to be clear upfront.
Our consultation closes on March 18, so there’s still time to send us your responses. Give us your thoughts and we'll build on them, working closely with the European Parliament, Member States, businesses and consumer groups every step of the way.
There are good examples of what we can achieve. Think about telecommunication, where liberalisation has brought huge benefits. Opening up the single market to European air travel has brought prices down by 40%. Through our digital single market agenda we're working to end online price discrimination, to strengthen protection for online shoppers, and to make digital subscriptions available wherever you are in Europe. The abolition of roaming charges by the middle of next year will mean consumers pay a fair price for using their phones abroad.
My hope is that in years to come people will look back and talk with the same enthusiasm about our work on consumer financial services. By increasing competition, transparency and choice, we have the chance to improve consumers' daily lives. With your help, I’m sure this is an opportunity we can seize.