Some weeks ago we introduced Regulatory Sandboxes, one of the so-called Innovation Facilitators, namely a part of the strategies pursued by national and European banking jurisdictions in response to the FinTech developments. This is how the European Parliament depict the situation in its report on “Regulatory Sandboxes and Innovation Hubs for FinTech” (September 2020) : “Jurisdictions across the European Union (EU) and beyond have adopted various initiatives to keep abreast of the rapid technological developments and to encourage the development of their FinTech ecosystems”.
This time we will focus on the Innovation Hubs, which can be presented as a contact point promoted by national finance regulators and supervisors to support financial institutions regarding FinTech issues. This tool is thought to offer many useful possibilities to firms which are new to the world of financial regulation and also to “provide guidance on the applicability of the existing regulation to new services, products and business models” (source: European Parliament).
To sum up the functions of Innovation Hubs, we can list these goals:
Similarly to Regulatory Sandboxes, also Innovation Hubs are meant to answer the growing need to face the quickly evolving environment and overcome the limitations of traditional law making. These structures provide a specific scheme for financial institutions to engage with the supervisory authority and they represent a useful first step in the regulatory innovation journey.
Looking at the European financial system, we can say that Innovation Hubs have essentially become a common tool, as in the EU and the EFTA (European Free Trade Association) countries, nearly all jurisdictions have established their hubs. Apart from the European Innovation Hub created by the EBA (European Banking Authority) - the “FinTech Knowledge Hub” -, any single country has defined name, operating modalities and design for its hub. These structures have evolved in time, passing from simply direct contact points - like a dedicated telephone and/or an electronic interface -, to the currently offered customized support and guidance, or access to investor networks and accelerators. Also in Italy Banca d’Italia has established the Hub FinTech in Milan, at the end of 2020, always aiming to provide support for “experimentation, selection of contributions by experts and independent companies - Italian and international - the cooperation with institutions, universities and the conversation between all the market players” (source: PWC report on SupTech 2020). To sum up the current situation, we can say that Innovation Hubs have already become a norm across Europe in respect to the relationship between financial institutions and both regulators and supervisors.
In these years at Aptus.AI we have pursued in the private sector the same general goals described by the European Parliament, in terms of providing interactive accessibility to regulations and law, that is “establishing certain common principles [...] to enable the collection of comparable data [...] for ensuring adequate knowledge sharing”. Our work in this path has led us to create an innovative AI solution called Daitomic. This RegTech platform is a regulatory compliance management system aiming to play a crucial role in the digitization process that European authorities themselves are promoting. Exploiting the latest Artificial Intelligence technologies, Daitomic will soon revolutionize the interaction between financial institutions and regulations - and, in the next future, between people and law. Contact us to learn more about it!