From our assessment of the regulatory landscape, we believe that all governments will increasingly focus on the following:
Scientists have long insisted on the urgent need to address the environmental crisis. Politicians across the globe are now clearly increasingly seeing the importance of this issue. US President Joe Biden brought the US back into the Paris Agreement on his first day in office. According to US Special Presidential Envoy for Climate John Kerry, the 2021 COP26 conference is the “last best chance” for the world to come together and avoid the “worst consequences of the climate crisis”(BBC).
In 2020, China launched its National Green Development Fund to support the “green transformation” of the economy. And the EU is striving to make Europe the first climate-neutral continent through the European Green Deal.
Some countries have already passed laws to mandate net-zero carbon emissions by 2050 and, through the European Climate Law, the European Commission is seeking to make it a legal requirement across the EU.
Many other countries are also committed to this target, even if not yet in law, by producing policy documents and proposing legislation.
These developments are likely to lead to a significant shift in how governments legislate, tax and spend.
"This global political convergence is likely to lead to significant shifts in how governments legislate and how they tax and spend."
The EU’s Sustainable Finance Disclosure Regulation, for example, requires manufacturers of financial products and financial advisors to disclose information to investors so they can take sustainability into account in their investment decisions.
The upcoming new Corporate Sustainability Reporting Directive will introduce stricter requirements for companies to report sustainability information. We foresee that sustainability-related reporting will soon be as important as financial reporting both for governments and investors. They will gradually complement this reporting requirement with minimum standards that companies will need to meet to operate.
In terms of taxation and spending, the US plans to repeal certain oil and gas tax benefits whilst extending and strengthening those for clean energy, while the “Made in America Tax Plan” aims to fund a “$2 trillion infrastructure and clean energy plan”.
In Europe, the EU’s Taxonomy for Sustainable Finance entered into force in July 2020, establishing a list of environmentally sustainable activities to help scale up sustainable investments. In the future, government spending and tax incentives stimulating businesses to be more climate-friendly will continue. In contrast, any incentive for non-green companies will disappear and could be replaced by disincentives.
Governments are increasingly focusing on protecting the safety and security of their citizens in the digital domain
In Europe, the General Data Protection Regulation (GDPR) seeks to enforce “fair play” in how businesses use people’s data and avoid this data being stolen through data breaches. The EU’s proposed Artificial Intelligence Act suggests classifying AI-based systems depending on the level of risk they pose, with an “unacceptable risk” category which will be banned (except for ethically conducted research).
The Digital Markets Act and Digital Services Act are aiming to promote a safe online environment for users, define responsibilities and accountability for a range of service providers, empower users, reduce barriers for businesses, foster innovation and growth, and protect fundamental rights. The Digital Markets Act, in particular, seeks to implement specific controls for large online platforms that are considered “gatekeepers” to ensure that consumers and businesses using these platforms are treated fairly. China, too, has drafted a regulation that seeks to prevent monopolistic practices by internet platforms.
Governments also want to ensure that critical services remain available, especially in times of crisis. In Europe, the planned Digital Operational Resilience Act (DORA) is expected to apply not only to the whole financial sector, but also to firms captured under the term “critical ICT third-party service providers”.
There are already well-established standards and legislation protecting citizens and businesses from digital fraud and theft in payments. The EMV specifications cover technologies that support card-based payment, including contact, contactless, mobile, payment tokenisation, QR codes, secure remote commerce and 3-D secure.
These standards are administered by EMVCo but are independently enforced by payment networks. The EU’s PSD2 regulation aims to reduce fraudulent transactions by introducing requirements for Strong Customer Authentication (SCA). These standards provide vital protection for consumers. Worldline’s partnership with FinTech A3BC provides fast and frictionless online payments fully compliant with SCA without requiring a single touch of a button by the end user.
In terms of preventing money laundering, the US Anti-Money Laundering Act became law at the start of 2021[X] and is well-aligned with the EU’s 4th and 5th Anti-Money Laundering (AML) directives. In turn, the EU proposes strengthening AML regulations and creating a new AML authority with direct supervisory power over institutions.
Governments are acutely aware that they must deliver services to their citizens that cannot be disrupted at the whim of another country’s government. This is particularly true with regards to critical infrastructure.
Politicians in Europe are now “convinced that a European payments system is a question of sovereignty”. This has led to the European Payments Initiative (EPI) to reduce dependency on US-based firms for payment services. Worldline has warmly welcomed this initiative and was the first non-bank acquirer to become a founding member of EPI in November 2020.
China’s progress with Central Bank Digital Currencies (CBDCs) is raising concerns in the US that it could undermine the dollar’s position as the global reserve currency”. This is prompting the US to accelerate its CBDC plans. In the EU, the European Central Bank has started work on creating a Digital Euro.
A specific subset of sovereignty is digital sovereignty.
More than 100 countries now have data sovereignty-related laws in place. In India, they banned 59 Chinese apps in 2020 due to concerns around "sovereignty and security”.
The often rapid and sometimes uncontrolled adoption of new tools like Zoom or WhatsApp by companies, driven by the pressure of the Covid-19 pandemic, has caused some to call for action.
We believe that sovereignty will continue to be a key priority for governments in the coming years. We expect digital sovereignty to be one area where there will continue to be rapid change.
Governments are keen to stimulate innovation for the benefit of their citizens. Last year the EU set aside more than half of the €806 billion NextGenerationEU recovery plan to support modernisation, including research and innovation and digital transitions.
US President Joe Biden announced a $325 billion research and innovation plan. Direct funding of research and innovation is one lever of influence that governments can deploy. However, regulations can also promote innovation, making it easier for smaller, more agile companies to enter the market.
In payments, we have already seen how Open Banking regulations around the world are enabling new ecosystems to flourish as opportunities are created for a greater variety of actors to access banking data. We expect that Open Banking Regulations will expand into Open Finance Regulations, which will enable innovative services to be built through permissioned access to all aspects of a person’s financial life: not only personal bank accounts, but also areas such as insurance, investments, accounting, financial advice, and pensions.
"We expect that open banking regulations will expand into open finance regulations."
Governments also recognise that the use and sharing of data can bring benefits, provided it is done in a trusted manner. In the EU, the proposed Data Act will seek to “create a fair data economy”, facilitating data flow across sectors and Member States while putting those who generate data in the driving seat. More sector-specific proposals will likely unfold for the use and exchange of data, like the European health data space initiative.
There are also initiatives that seek to foster innovation by making certain foundational components available as standard building blocks. The trusted identification of individuals is one example whereby some businesses require a mechanism to verify who someone is and check specific characteristics (e.g. over 18). Thus, we are seeing digital wallets starting to be used for the digital ID.
Some US states will soon allow people to store their driver’s licenses or state IDs in their Apple Wallet. In the EU, the proposed amendments to the eIDAS regulations will require the Member States to issue a European Digital Identity Wallet which all private services will need to accept and which will provide a high degree of interoperability. These types of standardisation make it easier for companies to build on these components to innovate services addressing wide geographic areas.
Another area where we see a drive towards standardisation is in the provision of cloud services, with initiatives such as GAIA-X and the GI Cloud Initiative seeking to define the requirements for cloud services in specific domains.
More chapters about Implicit Trust from Regulations
Authentication & SecurityAll the tools you need to protect your data, identity, and transactions. Trust us to keep your operation safe, hassle-free and fully compliant.Learn more Opens in a new tab
Open Banking SolutionsIt can be hard to find open banking solution providers. Take your digital offering to the next level with open banking payments. Discover our Open Banking Platform and discover open banking API providers.Learn more Opens in a new tab
Corporate Social Responsibility - How we make a differenceLearn about the role of companies in society and the environment with Worldline's knowledge on corporate social responsibility (CSR).Learn more Opens in a new tab