The Future of Data-Driven Finance and RegTech: Lessons from EU Big Bang II

57 Pages Posted: 27 Mar 2019 Last revised: 18 Apr 2019

See all articles by Dirk A. Zetzsche

Dirk A. Zetzsche

Universite du Luxembourg - Faculty of Law, Economics and Finance; Heinrich Heine University Dusseldorf - Center for Business & Corporate Law (CBC)

Douglas W. Arner

The University of Hong Kong - Faculty of Law

Ross P. Buckley

University of New South Wales (UNSW) - Faculty of Law

Rolf H. Weber

University of Zurich - Faculty of Law

Date Written: March 27, 2019

Abstract

Europe’s path to digitization and datafication in finance has rested upon four apparently unrelated pillars: (1) extensive reporting requirements imposed after the Global Financial Crisis to control systemic risk and change financial sector behavior; (2) strict data protection rules reflecting European cultural concerns about dominant actors in the data processing field; (3) the facilitation of open banking to enhance competition in banking and particularly payments; and (4) a legislative framework for digital identification imposed to further the European Single Market.

The paper analyzes these four pillars and suggests that together they will underpin the future of digital financial services in Europe, and – together – will drive a Big Bang transition to data-driven finance. These seemingly unrelated pillars together bolster an emerging ecosystem which aims to promote a balance among a range of sometimes conflicting objectives, including systemic risk, data security and privacy, efficiency, and customer protection. Furthermore, we argue Europe’s financial services and data protection regulatory reforms have unintentionally driven the use of regulatory technologies (RegTech) by intermediaries, supervisors and regulators, thereby laying the foundations for the digital transformation of both EU financial services and financial regulation. The experiences of Europe in this process provide insights for other societies in developing regulatory approaches to the intersection of data, finance and technology.

Keywords: Data Protection, Digital Identity, FinTech, Financial Regulation, General Data Protection Regulation (GDPR), Open Banking, Payment Services Directive 2 (PSD 2), RegTech

JEL Classification: D23, G38, K22, L22, M15, O16

Suggested Citation

Zetzsche, Dirk Andreas and Arner, Douglas W. and Buckley, Ross P. and Weber, Rolf H., The Future of Data-Driven Finance and RegTech: Lessons from EU Big Bang II (March 27, 2019). European Banking Institute Working Paper Series 2019/35; UNSW Law Research Paper No. 19-22; University of Luxembourg Law Working Paper No. 005-2019; University of Hong Kong Faculty of Law Research Paper No. 2019/004. Available at SSRN: https://ssrn.com/abstract=3359399 or http://dx.doi.org/10.2139/ssrn.3359399

Dirk Andreas Zetzsche

Universite du Luxembourg - Faculty of Law, Economics and Finance ( email )

Luxembourg, L-1511
Luxembourg

HOME PAGE: http://wwwen.uni.lu/recherche/fdef/research_unit_in_law/equipe/dirk_andreas_zetzsche

Heinrich Heine University Dusseldorf - Center for Business & Corporate Law (CBC) ( email )

Universitaetsstr. 1
D-40225 Düsseldorf
Germany
+49 211 81 15084 (Phone)
+49 211 81 11427 (Fax)

Douglas W. Arner (Contact Author)

The University of Hong Kong - Faculty of Law ( email )

Pokfulam Road
Hong Kong, Hong Kong
China

HOME PAGE: http://hub.hku.hk/rp/rp01237

Ross P. Buckley

University of New South Wales (UNSW) - Faculty of Law ( email )

Sydney, New South Wales 2052
Australia

Rolf H. Weber

University of Zurich - Faculty of Law ( email )

Universität Zürich
Rämistrasse 74 / 57
Zürich, CH-8001
Switzerland

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