Mr. Matthias Bauer-Langgartner
Senior Financial Services Expert

Matthias is a Senior Financial Services Expert at the European Central Bank (ECB) focusing on financial and emerging technologies, particularly distributed ledger technologies. As part of the ECB’s Authorisation Department, he is leading on the assessment of crypto-asset and fintech-related banking applications and policy discussions, including the EU’s Markets in Crypto-assets Regulation (MiCAR).

Prior to the ECB, Matthias served as Managing Director at a European Digital Assets Investment platform, leading its UK and Irish expansions.

In the decade prior to joining the private sector, Matthias gained invaluable expertise in UK and EU regulations and policymaking at three European regulators (UK FCA, German BaFin, and Austrian FMA). In his last role at the FCA, Matthias was a Technical Specialist at the Innovate Department, where he set up and continuously improved the FCA’s regulatory sandbox, and led the FCA’s approach to distributed ledger technology, including as part of the UK Cryptoassets Task Force.

Regulation will further boost fintech in 2024¹Views expressed are personal views only and cannot be attributed to the ECB.

In a world of increased geopolitical and macroeconomic uncertainty, technology driven innovation in financial services (fintech) continues to revolutionise the financial services landscape one step at the time. 2024 promises to be an(other) exciting year for fintech, as it will see new regulatory frameworks being designed or implemented, spanning from Open Banking to crypto-assets and artificial intelligence (AI) – to name just a few.

Cloud-based infrastructure and improved interoperability using APIs, empower businesses to cater to specialised customer segments with intuitive solutions. The global surge in digital payments, including advancements in central bank digital currencies, and Open Banking exemplify this trend. A new distribution model – Banking-as-a-Service – has taken up in multiple geographies, in partnership between banks and non-banks. These partnerships may be beneficial to both banks and non-banks as they often combine banks’ strengths in infrastructure, experience, risk management, and regulatory relationships, with the strengths of non-bank partners in customer acquisition, product development, and user experience. Within the EU, the Payment Service Directive (PSD) is paramount to Open Banking’s success. The forthcoming revision, PSD 3, targets improved competitiveness, laying the groundwork for its further – even global – adoption. In 2024, we can expect to see more widespread distribution of APIs, fostering unparalleled interconnectedness among financial stakeholders, creating new opportunities (and risks) for firms and customers.

Secondly, recently implemented and prospective regulatory frameworks for crypto-assets, including in South Korea, the UK and the EU, emphasise conduct and prudential rules, signifying a pivotal shift. The EU’s Markets in Crypto-Assets Regulation (MiCAR) sets standards in terms of authorisation and supervision of crypto-asset service providers and issuers of crypto-assets, including so-called

stablecoins. Its upcoming implementation should be closely observed: Already in 2024, we can expect to observe direct and indirect effects on markets, including whether MiCAR can restore investors’ shaken confidence marred by recent scandals. MiCAR imposes obligations and capital requirements on previously unregulated players, potentially prompting structural changes and market consolidation. Simultaneously, regulatory clarity might entice a wave of new market entrants, stimulating innovation in products like e-money and asset-referenced tokens. This dynamic landscape could create fresh prospects for both fintech startups and established players, fostering wider crypto-asset adoption. A fine line between collaboration and competition is likely to define interactions between market players in this evolving space.

Thirdly, discussions globally revolve around regulatory and ethical frameworks governing AI usage. The EU’s proposed AI Act, characterised by its risk-based approach, is well positioned to set new standards for the development and use of AI systems. The AI Act aims to introduce enhanced disclosure and data management obligations for both AI providers and users, notably also financial services firms, and seeks to ban applications considered as ‘unacceptable risk’. While AI adoption, including applications like chatbots, credit scoring, and algorithmic trading, is expected to increase in 2024, a new regulatory framework could bring greater clarity and legitimacy, further encouraging the utilisation of AI, especially in consumer-oriented applications.

As regulators and supervisors prepare for their evolving tasks, they will continue to enhance technological capabilities to harness the benefits of emerging tools and more expansive data resources, working towards more pro-active, technology-supported and effective supervision.

Concluding, well-calibrated regulatory frameworks, striking a balance between fostering innovation and ensuring effective oversight, customer protection, and market stability, are pivotal for the safe and enduring growth of fintech. The year 2024 emerges as a pivotal juncture, witnessing the introduction or design of numerous technology-related regulatory frameworks that lay the groundwork for sustainable innovation within financial markets for the years to come.

Expect regulation to further boost fintech in 2024.