“Opt-in passports” are the way forward, says Lendix co-founder Patrick de Nonneville.
The EU Commission is laying the groundwork for a licence that will allow European crowdfunding and peer-to-peer lending platforms to operate across the bloc. Valdis Dombrovskis, EU Commission vice-president for financial services, told the Financial Times last week that draft legislation for the licencing plans will be presented early this year.
The aim of the licence is to remove the administrative hurdles that have plagued platforms attempting to scale their activities across Europe. Each country within the bloc differs in its approach to regulating the nascent business of crowdfunding.
Mr Dombrovskis admitted that the lack of a “digital single market” has led to many a European fintech turning to the US or Asia in search of scale. In proposing its cross-border licence, the EU Commission is attempting to keep its success stories on home soil.
But what of the platform operators themselves? While proposals of this kind have long been lobbied for by the industry, their announcement has not been met with untempered enthusiasm.
“This is something we’re very involved in via constructive dialogue with the European Commission, bilaterally and as members of the European Crowdfunding Network. We think it’s a great development that will be useful for us,” said Patrick de Nonneville, chief operating officer at French marketplace lender Lendix.
But he added two caveats. The first was simply that implementation will take time. The second was that “there is a risk that what emerges is the lowest common denominator of what each country thinks appropriate”.
“That would be a disastrous result given some countries’ opposition to marketplace lending. So in the meantime we will continue opening new geographies by adapting our business model to local requirements,” he said.
De Nonneville is hopeful that his fears will not come to pass. “What they [The EU Commission] are moving towards now is this passport – but also to accommodate local regulation. So that platforms can choose between this passport or the local regulatory framework.” The Lendix chief calls this approach an “opt-in passport”.
De Nonneville thinks the EU has been encouraged by the ability of European fintech firms in the payments space to scale their operations under the Payment Services Directive (PSD).
Pärtel Tomberg, CEO and co-founder of another pan-European peer-to-peer firm, Bondora, was also measured in his assessment of the EU proposals.
“It is certainly a positive move. I see this as a positive indicator that Fintech innovation is and will be continue to be supported by EC,” he told AltFi. But once again there were caveats; for Tomberg, these pertained to existing regulations that are favourable to incumbent banks.
“I do not think it [the proposed legislation] has any direct operational benefits as many core Fintech ‘targets’ are still protected by banking regulations. In Germany for example you need a banking licence in order to lend money to individuals, even if it’s your own money. Similar requirements are present all across Europe.”
The Financial Times article on the EU Commission’s plan suggested that the licencing proposal was part of a broader campaign “to support an industry it hopes can compete with traditional banks”. For Tomberg, still more needs to be done to level the playing field between banks and peer-to-peer lenders.
“Governments should stop protecting banks, and remove strict market entry rules to services not related to deposit-taking, and let banks face real competition. Only this way will consumers really benefit from the ‘fintechs’.”
Raffael Johnen, CEO and co-founder of leading German marketplace lender auxmoney, offered his thoughts.
“We at auxmoney see the European licensing plans as a very positive development for the European crowdfunding market and the marketplace lending sector in particular,” he said. “Getting closer to a single digital market will further boost the creation of true European fintech champions.”