Minister, Ladies and Gentlemen,
I am very happy to welcome you this morning to the premises of the Banque de France. I also welcome those who join us remotely. We are all aware of the importance of new technologies to ensure continuity and stability in this crisis. My dear Cédric, you would clearly be the first to say it. I also welcome Alain Clot, President of France Fintech, and of course Robert Ophèle, President of the AMF, with whom we organized this Forum. Your presence among us, Minister, is proof of the government’s commitment to Fintechs. And this is my first message this morning: the Banque de France and the ACPR are also fully committed to supporting Fintechs. I will then continue by telling you how we intend to act in the digital payment revolution.
I. Banque de France and ACPR support for Fintechs
Let’s start with a question that I consider particularly important, and on which there should be no ambiguity between us: why do the Banque de France and the ACPR consider Fintech important? Because they are an essential element for the financial sector: they deliver creativity and they quickly understand new needs. And they bring French scientific and technological expertise to the fore: artificial intelligence, cryptography, distributed ledger technology, etc. Whatever their integration into the financial sector – through cooperation or direct competition with established players – they energize the industry. This is also true with regard to the entry into financial services of Bigtechs, which are often less fond of competition. I’m not saying this just to please the fintechs who are here with us today. It is a deep conviction and a commitment, on my part and that of the whole of the ACPR.
But what are you doing concretely, you will tell me, to help Fintechs in their development? First of all, let me remind you that the Banque de France supports Fintechs at two levels: via its mission of services to the economy – to businesses and SMEs – and via its mission of safeguarding financial stability. Our role, as central bank and supervisor, is to reconcile trust and innovation. If you allow me to borrow a metaphor from the history of the railways – which were originally a major innovation of the 19th century, but also an innovation which was not without risks – our role is to prevent the going off the rails and making sure passengers aren’t afraid to get on board. We therefore need to encourage innovation but also ensure that people trust the innovations.
At the Banque de France, we have undertaken various actions in favor of innovation. First, we appointed a start-up correspondent at the national level [Maurice Oms], and we will soon have start-up correspondents in the regional capitals of French Tech. The Banque de France’s innovation laboratory, the Lab, works with many players in the field. This year, we inaugurated a new site in Singapore, one of the epicentres of the Fintech industry. And recently, Paris was chosen alongside Frankfurt to host the European branch of the BIS Innovation Hub.
At the ACPR, we make every effort to facilitate contact with Fintechs at all stages. First of all, there is a single entry point: the Fintech-Innovation Unit. Since 2016, he has met and advised between 100 and 150 project leaders per year, to help them flesh out the first sketches of their project before possibly submitting it for approval. The approval procedure has also been simplified with the creation of a digital portal, and we have adapted certain procedures to recent developments: implementation of a simplified post-Brexit procedure in 2019, and a simplified procedure for a large number of Payment Service Providers (PSPs) in 2020. Additionally, in our day-to-day monitoring, we apply regulation using a proportional approach. For example, for small establishments, we allow a single person to hold more than one key position. To give another example, as part of the transposition of the second European Payment Services Directive (PSD2) in 2018, third-party payment service providers – who do not hold customer funds – are subject to requirements reduced annual declaration. However, this proportionality does not mean being less demanding, particularly in the fight against money laundering. The general principle “same activity, same rule” must apply. Indeed, it is in the very interest of Fintechs that we help them apply the regulatory framework.
We also want to help them when new rules are put in place. Under PSD2, the ACPR was the first European authority to issue licenses for payment initiation and aggregation services. In total, it has authorized more than 20 players to offer these new services since 2018. It has also worked to promote the development of open banking, by ensuring that all players can work together to deploy APIs.
The eight workshops this afternoon, led by experts from almost all of the ACPR’s departments, testify to the importance we place on education and information. But if we can do even better, even more, let us know today.
I will end by dwelling on the Fintech ACPR-AMF Forum which brings us together today. Created in 2016, it is a place of exchange that we try to make as efficient as possible by setting up, where necessary, targeted working groups to make concrete progress on key subjects. The 2018 task force on artificial intelligence resulted in the publication of a first report, then the launch of experiments with voluntary players, which will continue in new forms next year. This work is a first step towards publishing governance principles for AI algorithms. The working group on remote customer identification led to several regulatory changes this year. We now support ANSSI’s efforts to publish a framework so that these changes can be fully implemented. We have also set up two working groups with players from the crypto-asset sector. The first, which published its report last Wednesday, examines the range of anti-money laundering methods used by digital asset service providers: it highlights the potential of blockchain technology in tracing transactions, and sets out technical avenues for ensuring that electronic transfers meet recommended transparency requirements. by the FATF. The second aims to foster dialogue between digital asset service providers and banking players, to help crypto-asset entrepreneurs access the banking accounts and services they need.
II. The digital payment revolution
I would now like to address a subject closely related to Fintechs: payments in the digital age. Payments innovations are shaking up the traditional divide between central bank money and commercial bank money. People are using less and less cash, so less and less central bank money, and more and more contactless payments. In addition, the European payments ecosystem has become extremely dependent on extra-European players – today global card schemes, and tomorrow Bigtechs – so that it now has limited control over the management of personal data. . At the same time, the rise of crypto-assets and especially stablecoins means that they could potentially try to replace central bank and commercial bank money, even if they do not offer any of the same guarantees in terms of liquidity, continuity of service and neutrality.
Faced with this situation, Europe must develop a payment strategy. I have repeatedly insisted on this over the past two years. Recently, we have made decisive progress thanks to the strong involvement of the ECB and the Commission. Now we need to put this into action and “deliver” – this is urgent for the next two years. This strategy combines three elements in particular:
1/ European regulation on stablecoins: on September 24, the European Commission published its MiCA project, which we believe constitutes a good basis for reconciling innovation, consumer protection and financial stability.
2/ An acceleration on the digital currency of the European Central Bank (CBDC), the “digital euro”. We have not decided yet, but we must be ready to decide if it becomes necessary, and as soon as it becomes necessary. The Banque de France was the first to launch a program of eight experiments on a wholesale CBDC, in particular with a number of Fintechs, to improve the functioning of markets and financial institutions. If necessary, the Eurosystem could decide to issue a retail CBDC to ensure that the general public has access to central bank money, especially in countries where cash payments are declining. The ECB has created a high-level task force whose report we published ten days ago. We are now going to launch a public consultation today, examine all the regulatory and technical questions, and launch experiments with the national central banks – the Banque de France will actively contribute to this. By mid-2021, the Eurosystem will decide whether or not to launch a digital euro project, which would start with an investigation phase. And while we’re at it, let me comment on the terminology used: we sometimes hear about crypto-currencies, but the term is contradictory. You have either a currency, with all its functions and a public guarantee, or private crypto-assets. But there is no cryptocurrency.
3/ European mobilization on private payment infrastructures thanks in particular to the involvement of major European banks in the European Payment Infrastructure (EPI) project. It is crucial that we go beyond the current national systems and offer cross-border solutions with a pan-European brand. There is no contradiction between CBDC and PPE. We could most likely need both. The BRI recently underlined this complementarity between public money and commercial money in its report published on Friday. I would therefore like us to build a public/private partnership. Potential impacts on the banking sector and financial stability could be controlled through different means: for example, by having retail central bank digital currency distributed by banks, directly to individuals; and limiting the amount of digital euro in circulation to prevent overconversion of commercial bank money deposited in CBDCs.
In conclusion, I would like to recall a conviction: Fintechs are no longer separated from the world of finance. They are transforming the practices of financial institutions, their relations with customers – we can clearly see this with payments – as well as their relations with the supervisory authorities: new technologies are useful not only for improving crisis prevention and management, but also to optimize the supervisor’s work. We are talking about Regtech and Suptech. All these dimensions will be taken into account in the Banque de France’s next strategic plan, “Building 2024 together”. Thank you for your attention.