Digitisation is transforming the European financial system and the provision of financial services to Europe’s businesses and citizens.
The financial ecosystem is continuously evolving, with technologies such as Blockchain, Artificial Intelligence and the Internet of Things moving from the experimental phase, to pilot testing and the deployment stage. Indeed, digitisation of the financial sector can only be expected to accelerate because of the Coronavirus pandemic.
The ensuing social distancing measures have underscored the importance of innovation in digital financial products services, including for those who are not digitally native, as everybody is obliged to rely on remote services during the lockdown.
At the same time, as people access to their bank accounts and other financial services remotely, and as financial sector employees work remotely, the digital operational resilience of the financial sector has become more important than ever.
And digital finance can contribute to tackling the Coronavirus crisis and its consequences for citizens, businesses, and the economy at large in a number of ways.
For several years, the European Union has been embracing digitisation and innovation in the financial sector.
“The EU has been at the forefront of enabling innovative Fintech solutions, in particular in the payments sector”
This has occurred through different policies implemented mainly under the Digital Single Market Strategy, the Cyber Strategy and the Data Economy as well as sectoral initiatives supporting the scaling up of innovative services and businesses throughout the EU.
The aim has been to promote the uptake of new technologies by the financial industry, such as cloud computing, as well as to enhance the security and resilience of the financial sector.
In recent years, an increasing number of innovative and vibrant FinTechs have sprung up across the EU. New companies are being set up, and established firms are growing and scaling up to meet the digital challenge.
Digital currencies and the emergence of ‘Big Tech’ are simply the most visible examples of a fundamental transformation.
It is a change that is bringing innovation and making many European cities prominent hubs of a buzzing new FinTech culture.
The EU has been at the forefront of enabling innovative Fintech solutions, in particular in the payments sector. EU legislation in this area is key to promoting a transparent, innovative and competitive payments market in the EU.
The Electronic Money Directive (EMD) and the first Payment Services Directive (PSD) introduced a licensing regime that allows the issuance of electronic money and the provision of payment services by non-bank financial institutions.
This created a number of FinTechs operating in the payments sphere; a trend that has accelerated via new business models based on data sharing.
The EU’s 2018 Fintech Action Plan has also supported these developments, and its implementation has recently been concluded with a look to the future by the Expert Group on Regulatory Obstacles to Financial Innovation.
Digitisation and new technologies will continue to evolve and transform the way we access financial services in the years to come.
So, while the immediate focus must be fully on the task of fighting the Coronavirus emergency, including its economic and social consequences, in future the European Commission will be working on a new digital finance strategy to ensure that the EU is able to make the most of FinTech and compete globally.
To feed into the strategy, the Commission seeks the advice and opinions of consumers, companies and national authorities via public consultations launched from April to June 2020 on digital finance and on payments.
“Strong and innovative digital capacities in the financial sector will help improve the EU’s ability to deal with emergencies such as COVID-19”
In addition, a number of online outreach events are planned in several Member States. How can consumers and businesses benefit from digital finance while remaining protected? How can we regulate innovative technologies without crushing them? How can we ensure a level playing field for banks, FinTechs and Big Tech?
The results and feedback will shape the key priorities for a future EU digital finance strategy. Europe’s strategic objective should be to ensure that European consumers and firms reap the full benefits arising from digital finance while remaining protected from potential new risks.
To achieve this, Europe’s financial sector needs to be at the forefront of innovation and its implementation. Strong and innovative digital capacities in the financial sector will help improve the EU’s ability to deal with emergencies such as COVID-19.
It will help to further reinforce the Banking Union and Capital Markets Union and thereby strengthen Europe‘s economic and monetary union. It will also help mobilise funding to support key polices such as the European Green Deal and sustainable finance.
This would also help safeguard the EU’s strategic sovereignty in financial services and our capacity to manage, regulate and supervise the financial system while promoting Europe’s values and financial stability and strengthening the international role of the euro.