The spearhead of the European Commission is the twin transition: the digitalisation and sustainability of the economy. As with any transition, there are not only winners but also people who may lose out because for them the transition entails disadvantages. It is important to take an extra step for this group so that they too can come along. In existing various legislative initiatives, the European legislator pays attention to ‘the vulnerable consumer’ who risks falling further behind due to the ongoing digitalisation of financial services. Let us review a few legislative proposals.
Firstly, there is the Directive on Accessibility Requirements for Products and Services (Accessibility Act). The Accessibility Act aims to enable persons with disabilities to participate fully and effectively in society. The concept of ‘persons with disabilities’ is defined as ‘persons with long-term physical, mental, intellectual, or sensory impairments who face various barriers in their interactions that may prevent them from participating fully, effectively, and on an equal basis with others in the society’. This Directive pays specific attention to the accessibility of ‘banking services for consumers’. Although the word bank may suggest otherwise, parties other than credit institutions can also provide these banking services. Banking services include all payment, investment, electronic money, and credit services to consumers. All these service providers must organise their services in such a way that persons with disabilities can also use them. The Accessibility Act provides detailed rules regarding, among other things, the technical design of websites and apps and the information to be provided. A special requirement for banking services is that the information must be provided at language level B2. National regulators will supervise compliance with the new rules within the financial sector from June 2025. Secondly, we would like to mention the draft Regulation on the Legal Tender of Euro Banknotes and Coins. In the recitals, the European legislator pays specific attention to the importance of cash for vulnerable groups, including the elderly, people with disabilities, people with limited digital skills, or those with a lower income. Also, it mentions financially excluded people, such as people without a bank account, asylum seekers, and migrants. The regulation requires that Member States ensure that cash is sufficiently available for these vulnerable groups throughout the territory of the Member State and that they intervene if this availability is threatened.
The proposal for the Financial Data Access Regulation (the FIDA Regulation) also specifically considers vulnerable consumers.1 For example, recital considers: ‘Data users’ practices of combining new and traditional sources of client data within the scope of this Regulation should be proportionate to avoid creating a risk of financial exclusion for clients.
Practices that lead to a more sophisticated or comprehensive analysis of certain vulnerable consumer segments, such as low-income persons, may increase the risk of unfair conditions or price differentiation, such as charging differentiated premiums.’ The EC concept stipulates that EBA and EIOPA must lay down within the guidelines which data may be used for credit scoring of consumers and for determining risks and pricing for insurance, respectively). Meanwhile, the proposal from the rapporteur suggests that this should not be done in guidelines, but in regulatory technical standards (RTS) that, unlike guidelines, are formally binding. With regard to insurance, the rapporteur makes explicit that these RTS should also prevent the solidarity (the ‘risk sharing’ principle) of the insurance market from being undermined by the risk analysis becoming too precise (granular). The rapporteur’s proposal also prohibits financial institutions from refusing consumers who do not want to share data or who are unable to do so because they do not possess the required digital skills for this.
The proposal for PSD3 and PSR (the Third Payment Services Directive and Payment Services Regulation) points out the special risks for vulnerable consumers of becoming victims of fraud. Fraud monitoring and information by payment service providers must therefore protect them in particular. In addition, persons with disabilities, the elderly, persons with low digital skills and persons who do not have access to digital devices such as smartphones, should also be able to use the security tools for payment services (Strong Customer Authentication). The same applies to the digital euro draft Regulation on the legal tender of euro banknotes and coins). This must also meet the requirements of the Accessibility Act and must have user and service functions that are simple and easy to use for persons with disabilities, functional limitations or limited digital skills, and the elderly. Furthermore, payment service providers are instructed to provide support for digital inclusion to these individuals. This support includes specific assistance in opening an account in digital euros and in using all basic services in digital euros.
Finally, we would like to mention the draft AI Act, the political compromise that has now been reached. It provides that AI systems that engage in social scoring or could lead to the exploitation of vulnerable consumers are prohibited. High risk systems that require special attention before they may be deployed are systems that serve for credit scoring of natural persons and risk assessment with regard to health and life insurance. This is again due to the specific risks for vulnerable groups. Many of the aforementioned regulations mean that financial companies have to incur costs to implement adjustments. For smaller or innovative companies, these rules can sometimes be applied proportionately (Accessibility Act and the sandbox in the AI Act).
Our prediction for 2024 is that taking the interests of vulnerable customers into account will be an important theme for financial companies. In our opinion, more awareness is necessary and desirable. A digital society is only a fair and morally high-standing society if it is a hospitable place for everyone.
1For more about FIDA, see Emanuel van Praag’s article in issue 11 of 2023 of Tijdschrift voor Financieel recht (Journal for Financial Law).
This article was originally published in The Paypers` Global Payments and Fintech Trends Report 2024. The report compiles insights and expertise from leaders representing companies across the financial services spectrum and it delves into the latest innovations and trends in payments and fintech across key markets worldwide.
Emanuel van Praag, Attorney-at-law at Kennedy Van der Laan, The Netherlands and Professor of Financial Technology and Law, Erasmus University Rotterdam.
Eugerta Muçi, PhD Candidate on Open Finance at Erasmus School of Law, Erasmus University Rotterdam.
About companies
KVdL was established in 1992, and since then has been driven by the ambition to serve as top-level attorneys and improve the world. With over 120 lawyers Kennedy Van der Laan is a full-service law firm. KVdL’s FinTech and payments practice is highly regarded.
Erasmus University Rotterdam was founded in 1913 and is a highly ranked, international research university, based in the dynamic and diverse city of Rotterdam, the Netherlands.
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