Noémie Papp / Jan 2016
Jonathan Hill, European Commissioner for Financial Stability, Financial Services and Capital Markets Union. Photo: European Union
In May 2015, the European Commission published its strategy for the creation of a Digital Single Market (DSM) which represents one of the ten priorities set out by the President of the European Commission, Jean-Claude Juncker. It particularly aims at making the digital economy a reality by alleviating the fragmentation of the single market and removing cross-border trade barriers for the benefit of businesses and consumer welfare. Surprisingly, the banking sector has not been mentioned in this important strategy despite its key role in the digital transformation and financing of the economy (not least, the digital economy).
Banks are major actors in the new digital ecosystem, in particular, on payments and online banking. In order to meet new customers’ demands and to be continually one step ahead in a highly competitive market, banks have accelerated the rethinking of their business model, proposing innovative products/apps, engaging in Fintech partnerships, and financing innovative starts-ups. Banks constantly launch high-quality digital communication, user-friendly financial products and services that simplify consumers’ trade and transaction management experience.
The digitalisation of banks has been brought about by a transformation from a multichannel approach (focusing on maximising the performance of each physical channel, phone, web, mobile) to an omnichannel approach, putting the customer at the centre and promoting the use of channels simultaneously (instead of focusing on corporate silos). All channels are now linked to one platform with integrated devices, providing a seamless banking experience for customers.
That seamless experience is underpinned by vast amounts of data. Data enable banks to develop real-time and personalised services to customers, to identify fraud more easily and to provide a more accurate view of credit and liquidity risks. Data analytics clearly represent the new reality for businesses but they also imply creating a truly functioning EU single market which allows the development of innovative products and services to meet customer’s increasing expectations.
Banks are keen to preserve their core values: trust, integrity, privacy and security in order to offer the best of the digital age to consumers. Creating a Digital Single Market, which meets the full potential of the new digital environment provides, undeniably, a great opportunity to bring the banking industry up to the highest level of performance and values.
Currently, the EU regulatory framework is insufficiently adapted to the digital reality. This prevents banks from taking full advantage of technological innovations and hinders them from becoming more digital and from launching new innovative products and services. The Blueprint “Driving the digital transformation: the EBF Blueprint a guide for policy change” recently published by the European Banking Federation provides a number of examples which illustrates this point.
Fortunately, the European Commission has begun giving further consideration to the digital transformation of the financial sector. Last month, the European Commissioner, Jonathan Hill, in charge of Financial Stability, Financial Services and Capital Markets Union, launched a Green Paper on retail financial services which aims at examining the different ways to improve choice, transparency and competition in retail financial services and facilitating cross-border supply. This consultation has also for objective to assess the impact of digitalisation on retail financial services. This initiative will complement the work conducted by the European Commission within the Digital Single Market Strategy.
Allowing all businesses to develop further innovative digital solutions at EU level, in a competitive environment created by a level playing field, while maintaining the security and protection of consumers, should be the main line to follow for the creation of a Digital Single Market. A more holistic approach with a more orderly transformation is indispensable so as to guarantee full benefits to customers and to avoid unnecessary and risky disruptions of markets and financial instability. Only such an approach will ensure consumers’ trust which is essential for the progress of the digital economy.