Digital finance

Digital finance describes the impact of new, digital technologies on financial services. It covers a wide range of products, applications, processes and business models that are transforming financial services and that may benefit businesses and consumers by:

• allowing them greater access to financial services;
• offering wider choice; and
• making operations more efficient.

These technologies can also help to bring down national barriers and boost competition in areas such as:

• online banking, online payments and transfer services;
• peer-to-peer lending;
• personal investment advice and services.

In 2020, the European Commission adopted a digital finance package. This includes the Commission’s strategy for harnessing the potential of digital finance while addressing potential challenges. The package also included two sets of legislative proposals on crypto-assets and digital resilience.

The strategy aims to give consumers access to innovative financial products, while ensuring consumer protection and financial stability. It has 4 priorities:

• removing fragmentation in the EU’s digital single market;
• adapting the regulatory framework to facilitate digital innovation;
• promoting data-driven finance;
• tackling the challenges and risks of digital transformation, including enhancing the digital operational resilience of the financial system.

The legislative proposals concern the creation of:

• a framework on crypto-assets to allow for innovation in a way that preserves financial stability and protects investors;
• a framework on digital operational resilience to prevent and mitigate cyber threats, ensuring banks, stock exchanges, clearing houses and FinTech organisations, meet strict standards to prevent and limit the impact of technology-related incidents.

The Commission also adopted a strategy on retail payments in 2020. This aims to further develop the European payments market so it can benefit fully from innovation and the opportunities that come with digitalisation.