Good afternoon, ladies and gentlemen
It is a pleasure to address today’s conference on digital finance.
Many thanks to DG FISMA for organising this concluding event of what has been a series of webinars.
Digital technologies have transformed people’s habits and behaviour for a long time.
Technology has changed our societies in a way that we could not have imagined even a few decades ago.
Consumers and businesses want access new online services. Providers are looking for new and better ways to supply them.
In Europe certainly, there is no shortage of demand for exciting new tech. Neither there is a shortage of the talent to innovate and make it available.
One thing that the pandemic has shown is how much we depend on digital technology to keep things running in the middle of restrictions and lockdowns.
This is true for digital financial services as well.
With customers of most financial institutions – and their employees – obliged to stay at home, carrying out financial transactions online quickly turned from being a convenience into a necessity.
And a great deal more people have now seen its benefits.
Digital payments have helped many people to make essential daily purchases while staying socially distanced. Capital markets have kept operating.
In fact, digitalisation has been vital for guaranteeing business continuity: all during a time when bank branches were closed.
Once the crisis passes, I would not expect the process of embracing digitalisation to slow down - given how quickly technology evolves and the strong demand that I just mentioned.
Europe’s financial sector is constantly evolving as well.
Even so, it is hard pushed to keep up with the breakneck speed of technological progress.
To stay ahead of the game and compete globally, it must make the most of digital opportunities.
I see digital as the future of finance.
Embracing digital finance, and making it mainstream, will also help to create jobs and economic growth in Europe as our countries are recovering from the pandemic.
Consumers will gain better access to products more suited to their needs. Providers will be able to provide services more efficiently and with larger reach.
This is a good chance for Europe to strengthen its international standing and to become a global standard-setter, with European companies leading new technologies for digital finance.
On a global basis, Europe is already well positioned in this area.
FinTech is the largest recipient of venture capital investment: 20% of all venture capital in Europe, a higher share than in Asia and the United States, has been invested in Fintech.
We have a good basis for regulation too. The EU’s payment services directive, or PSD2, is recognised as a world leader for regulating and promoting innovation in open payments.
But there are still many obstacles in the way.
Take FinTech start-ups. Today, they face many barriers that prevent them from exploring the full potential of the single market – for example, different licensing procedures.
This leads to fragmentation of their activities country by country, making it harder for them to grow and scale up across borders.
If Europe is to make the most out of innovations such as distributed ledger technology, artificial intelligence and data-driven finance, we have to maximise the single market’s potential so that companies can scale up across borders.
This is how consumers get more choice, and access to cutting-edge digital tech, with better products and services at lower price. It is also how companies, especially smaller ones, get better access to funding.
This is essential if European companies are to compete with their peers in Asia and the United States.
At the same time, we need to continue regulating and supervising risks appropriately. Strong regulation and supervision are key to preserving trust in finance, whether for traditional or new players.
This is why our approach is to ensure that all activities and all risks are properly regulated and supervised. EU rules must be fully applied, and enforced, by supervisory authorities.
Later this year, we will present a digital finance strategy for Europe to make the most out of digital finance and compete globally, removing more regulatory barriers between countries, while ensuring adequate supervision.
Over the last months, we have been gathering views from consumers, companies and authorities in Europe, and beyond.
Our public consultation runs until the end of this week.
Our Digital Finance Outreach webinars attracted more than 3,000 participants. This series of national events held across EU concludes with today’s conference. All the input and views gathered in these events will feed into our strategy.
Let us not forget the pan-European hackathon, also organised by the European Commission.
One of the categories was digital finance, where FinTech engineers and innovators competed to find ways to respond and help during the pandemic.
Congratulations to the winner: Bankera Business Care from Lithuania, which created a way to provide small and medium-sized businesses with short-term financing to cover cash-flow problems at a time of crisis.
This is an excellent example of the kind of innovative spirit that we want to promote with our digital finance strategy.
The focus in our strategy will be on three main areas:
First, how to deepen the single market for digital financial services, and to address the barriers to scaling up that I just mentioned.
We will also look at ways to make it easier for consumers and firms to make full use of the single market - for example by using digital identities.
Then, how to promote a data-driven financial sector: how to access public data, for example.
Building on the ‘open banking’ concept, the strategy will assess the merits of an ‘open finance’ policy in the EU.
This follows up on a recent recommendation made by the High-Level Forum on the Capital Markets Union.
Lastly, we will see how EU rules in this area can stimulate innovation while remaining technology-neutral.
Crypto-assets and distributed ledger technology will be our first test case.
They have the potential to bring benefits to consumers, businesses as well as market participants.
Cheaper and faster payments, for example – or new funding sources for smaller businesses.
Lack of legal certainty is often cited as the main barrier to developing a sound crypto-asset market in the EU.
We intend to change that – and here, I believe that Europe is in a position to lead the way on regulation.
For this, we need a common approach: one that supports and stimulates innovation.
We plan to present legislation in this area later in the year.
Some crypto-assets fall under existing EU rules.
Many do not. But they present familiar issues of consumer protection, market integrity and equal conditions for competition. This exposes consumers to substantial risks and fragmented national rules in the single market.
For crypto-assets covered by the EU rules, there are several areas where we should adjust those rules to make sure that they remain fit for purpose.
Since distributed ledger technology evolves constantly, we will propose a pilot scheme to give some regulatory flexibility for experimentation – but well framed and under close supervisory oversight.
For those assets which are not covered, we will create a bespoke regime and a passport for markets in crypto-assets. The aim is to make sure that risks are addressed, and that investors and users have a clear understanding of them.
Overall, our approach will be proportionate and relate to the level of risk. That means lighter rules for less risky projects.
However, with crypto-assets like stablecoins - whose value is pegged to a currency like the euro or to a basket of currencies - we need to distinguish between ‘global stablecoins’ and those created by smaller start-ups and FinTech innovators.
If they reach a global scale, stablecoins are likely to raise additional challenges in terms of financial stability and monetary policy.
In these cases, because of their potentially systemic role, our rules will be stronger.
Ladies and gentlemen
The last few months have made it clear that most people in Europe are ready for digital finance.
However, they are not naïve either.
They will not let their money and savings ‘go digital’ without having full confidence in a system.
This brings me on to digital operational resilience.
The financial system has long been a favoured target for cyber-criminals, attracted by its sensitive data and high-value assets.
The risks of attack multiply with our increased dependence on digitalisation: more people accessing financial services online and more financial sector employees working remotely.
This is what happened during Europe’s national lockdowns.
After the pandemic began, we saw usage of finance mobile apps in Europe shoot up by 72% in just one week, due to social distancing and lockdown restrictions.
At the same time, attacks on financial institutions have risen by 38% and account for more than half of all attacks observed during that period.
As the European Systemic Risk Board has pointed out, cyber risk is a source of systemic risks to the financial system that could have serious negative consequences for the real economy.
One cyber incident can evolve into a systemic cyber crisis.
The Commission is now working on legislation for all financial institutions to comply with standards of operational resilience. We plan to present this in a similar timeframe, in early autumn.
Among other areas, it will set out effective channels for reporting cyber incidents and identify tools for testing the cyber-resilience of our financial firms.
Our aim is to secure and strengthen the digital resilience of our entire financial system.
It must have the operational capacity to detect, address and recover from incidents such as cyber-attacks.
For these reasons, cybersecurity remains an important priority.
In addition, if Europe is to lead on innovation in digital finance, our financial institutions must first overhaul their legacy IT systems to make them fit for the future.
It also means being more flexible and open to working with FinTech companies.
Outsourcing to third-party ICT providers, like cloud services, can help a great deal in this respect. But this will only happen if supervisors are properly equipped to keep the risks in check.
So as part of our proposed regulation, we will create a financial oversight mechanism for these providers. We will also look at setting rules to deal with concentration risks that come from relying on a handful of outside providers.
Ladies and gentlemen
The digital age is firmly upon us. Europe’s financial sector needs it to move forward.
Yes, there are risks. But there are many opportunities that we need to grasp too.
To achieve that balance, I believe that our financial sector must be at the forefront of innovation.
Today, we would like to hear from you how we can do this, and how Europe can progress and lead in digital finance.
So, what are the main barriers to scaling up?
What can we - and should we - do about them?
What is the best way to promote data-driven financial innovation? And how can EU regulation support it?
We need to address all these questions, their answers will help to shape Europe’s digital future in finance.
However, before we move to panel discussions, we should take look at a great example of innovative FinTech in action.
So before we move ahead, I would like to ask the winners of the ‘EU versus virus hackathon’ to present their project.
Thank you very much.