Under new data protection rules agreed this week, companies that do not comply with them can expect to face major fines of up to 4% of their global turnover, which could mean that the larger technology firms could be fined with billions.
While consumers and businesses have become more experienced at using digital technology, the European economy has had to change to suit these differences and, in turn, implement regulations. The new laws intend to consolidate a united set of laws for data protection across the European Union, which includes every company having to employ a data protection officer, according to The Financial Times.
In 2006, after the MiFid regulation was announced, it provided a catalyst for other regulations to emerge and ensured that the finance and technology industries were spaces in which new fintech companies could grow and mature to disrupt traditional players by solving the problems they could not. This questions whether the new data protection laws will encourage or prevent new players to enter the unfamiliar territory of fintech.
After four years of negotiating and convincing, the text was officially signed off by the parliament and member states and Jan Philipp Albrecht, the negotiator, believes that this decision will be beneficial for technology. “This would be a major step forward for consumer protection and competition and ensure Europe has data protection rules that are fit for purpose in the digital age.”
Alongside this, the prime minister of Luxembourg, Xavier Bettel, another negotiator on behalf of other national capitals had a similar view to Albrecht. “The right to protection of personal data and the needs of the digital economy with regard to data are not incompatible. This reform allows us to succeed in squaring the circle.”
New regulations could be the best way to safeguard new technology from risk but European institutions are hesitant to take risks on the infrastructure of a new product, as William Fenick from Interxion explains in Silicon Republic. “If it is based on the cloud, prospective customers will need to know where the cloud is based, crucial with regards to legal jurisdiction and particularly in light of the recent Safe Harbour ruling by the European Court of Justice,” Fenick explained.
Fintech companies have many obstacles to get through to become competitors of the financial industry, especially as customers are looking for maturity and experience in the field, and this is regardless of whether or not the data regulations offer a stable ground for a startup to flourish.