European authorities are celebrating Digital Day 2018 today, an event that brings together technology experts and competent authorities to promote measures encouraging investment in digital technologies and European infrastructure. At this point, few skeptics doubt the changes and benefits stemming from the digital revolution. Some studies estimate that the digitalization of products and services could contribute over 110 billion euros in annual revenue to European industry over the next five years. This does not include the added value derived from leveraging new technologies in the provision of public services. A digital Europe contributes to economic growth and to building a competitive and socially secure society. It is a goal of the European political agenda, and it should be equally so for national authorities.
The commitment to innovation is so strategic for a country that few have not yet announced plans or super-measures to avoid losing competitiveness in their most prominent industries. The United Kingdom has done so decisively with its Innovative plan for financial services, and Germany with its various hubs focused on the development of industry-oriented artificial intelligence.
Spain is also doing its homework, betting on leadership in 5G development and through the creation of an inter-ministerial working group tasked with drafting an ambitious Plan to boost the digital transformation of the national economy.
The Spanish financial system is a relevant player in the digitalization of our economy. It is difficult to conceive of a digital economy without efficient digital financial services for its citizens and businesses.
Our banks’ commitment to digitalization and innovation in financial services (Fintech activity) is not new and has been developing for many years. It is no coincidence that we are the sixth country where “Fintech” applications have the highest penetration among society. The current offering of banking services and applications available through the web or mobile channels of Spanish banks is very extensive, and the number of digital customers is constantly growing (approximately 50% of total customers).
However, beyond the web environment, our banks are undertaking a profound internal transformation process to incorporate the numerous benefits that can be extracted from applying new technologies, both for improving the quality of services offered and for their internal processes and risk management.
Thus, all those innovative technologies in the sights of European authorities and currently being examined at Digital Day 2018 – artificial intelligence, data science, or blockchain, among others – are relevant to the banking sector and can lead not only to internal efficiency gains but also to the configuration of a new customer relationship. The aim is to achieve greater personalization of services, increased agility and convenience, better personal finance management, and the possibility of offering new associated products and services.
However, for this to become a reality, numerous challenges still need to be addressed. Some of them are cross-cutting for all industries and are a priority objective for European authorities – such as cybersecurity or the necessary digital literacy education for citizens. Likewise, the deployment of artificial intelligence or distributed ledger technologies (blockchain) still raises numerous questions that must be addressed within the community and from a cross-sectoral perspective.
Other challenges, however, stem from the financial sector’s own regulations – many of which predate the innovation boom of recent years. Some regulations hinder the commercialization of certain services through digital channels, discourage the innovative process with slow and/or costly supervisory procedures, or simply establish different rules for the provision of the same service between credit institutions and other non-banking agents.
For these latter challenges, coordination among all involved authorities – European and national – is necessary. The objective of Digital Day 2018 is laudable and necessary, but it must be accompanied by a clear political will to enable major European innovation and digital transformation projects to permeate each sectoral vertical, overcoming potential initial barriers. Because in the digital economy, the boundaries between sectors are more blurred, and therefore sectoral regulations create friction.
Similarly, at the national level, there is also scope for boosting innovation in financial services. The recent announcement by the Minister of Economy, Industry and Competitiveness to promote a regulatory sandbox for the Spanish market is excellent news that we in the banking industry welcome.
In any case, obstacles inhibiting innovation in the financial sector must be addressed without further delay, ensuring technologically neutral regulations that foster fair competition and preserve the necessary protection of financial service users and market integrity. The financial system’s ability to be innovative and competitive against other global players is at stake, and with it, the possibility of continuing to contribute to the digitalization and economic growth of the European economy.
Lorena Mullor, Public Policy Advisor
