New regulations, as I said in my previous essay, are altering the digital economy as we know it.

However, a clear imbalance and the need to change to keep up with new models and players can still be seen on the regulatory front. Our particular elephant in the room is that our regulation is somehow stuck in the analogue world (to quote Santander’s chairwoman Ana Botin). There is no need to amend the underlying principles of regulation to solve this, but a change in how regulation tackles a fundamentally different reality with major companies that are also involved in the financial services arena and where the lines between sectors are entirely blurred.

It’s also necessary to note that supervisory bodies are currently dealing with completely new dynamics that need to be assessed to ensure that they are capable of complying with their supervisory duties. For example, the European Commission is calling on the European Supervisory Authorities (ESAs) for recommendations on how these new players and their dynamics are having an effect in phrases of the fragmentation of the value chain, and how structures are editing the way financial products and offerings are rendered. Most crucially they are searching into how the cross-sectoral nature of certain players (referred to as blended activity agencies — MAGs) may additionally allow them the possibility to fly beneath the supervisory radar in some situations.

As a result, we're seeing a variety of reactions from various institutions. The Bank for International Settlements (BIS) is one of the most vocal proponents of a hybrid strategy that combines entity-based and activity-based regulation.

It is the primary objective of any regulatory activity to protect financial stability and customer interests. However, regulators should not lose sight of the competition issue, which requires all players to be able to compete in an equal way.

In this new digital era, it is of utmost importance that regulators are successful in designing and implementing the required level playing field and supervisory oversight framework. Because one thing is also crystal clear: most competitors compete on a free and open marketplace.

A level playing field for regulatory purposes and the improvement of the supervisory oversight framework within this new digital landscape are of utmost importance.

There is also a thing that is crystal clear: most companies are probably operating in the right way from a current regulatory perspective, but the problem probably lies in the disconnect between the current regulatory framework and the new market dynamics. To design the much-needed level playing field, I believe there are three crucial elements:

• Cross sectoral access to data, always with a customer-centric view.  Across sectors, we need to use data from all aspects of the customer's digital journey, not just insights from the financial services industry. To provide superior financial products and services, we need to use data across sectors. These datasets give big tech companies tremendous competitive advantages. As there is no cross-sectoral data sharing framework, payments institutions are only able to access data generated through the payments system.

• Access to infrastructures. Technical providers playing a vital role in the provision of financial services. In the same vein, some tech companies control key enablers used in the provision of certain services, preventing third parties from accessing those services. A good example of this is the access to specific software offered by certain mobile phone companies. Providing access to such software would encourage innovation as we know it.

• Proper regulation that equally captures every player participating in the market. As a regulatory framework, the tariff rate must become flexible according to the activity each key player conducts, while also taking into consideration the individual and distinctive risks that each key player poses. To illustrate this, any bigtech company providing payments can do that with a light licence (as payment service provider). However, a company that is also paying services in the same space but is part of a banking institution, is bound to the full prudential regulatory burden of the bank. In spite of the fact that it is a separate company that does not take deposits from customers and has its own regulatory regime based on the activity it performs (payments). There is a negative impact on level playing fields, such as remuneration, which makes it harder to compete on equal terms. Equally, if a non-bank is providing financial ecosystem services such as payments on a scale that makes them a critical feature of the economic system they should be regulated accordingly. Technology providers may not be registered as payment service providers, but their infrastructures are used to interact with customers and set market conditions. They should be included in the scope of PSD2. Meanwhile, as things progress, and some large tech companies continue to make inroads into the financial services market, their operations may grow systemically important. This should be acknowledged by the regulatory framework.

In defining this framework in a manner that suits our digital context, leaving behind the outdated and siloed analogue approach, we will be able to reap the benefits of the new models while building a competition-driven environment that ensures financial stability and consumer protection.

As the disruptive, technology-based payment businesses of Banco Santander, we at PagoNxt define our business as a fintech company with the heritage of a leading global bank. In a post-covid, customer-centric world, we recognise the benefits of a financial institution's mindset and the nimble agility of a fintech.

Operating at this crossroad, we have bolstered our activity and service offerings across the payments landscape to create solutions that suit global needs at a local level.