Digital finance: a driver of major societal benefits and key for a successful transition to a digital economy
Digital Europe, an international non-profit association whose membership includes 41 national trade associations from across Europe as well as 102 corporations which are global leaders in their field of activity, released a report explaining why a successful digital finance ecosystem is a must-have if we want a more inclusive, green, prosperous and secure Europe. Digital finance is at the heart of digital transition and if done successfully could bring major societal benefits.
According to the report, the digital transformation of financial services will deliver four core benefits for society in the EU. To achieve that benefits the report provides some policy recommendations that the EU lawmakers should integrate into its policies for the financial sector, to allow for its continued innovation in an efficient way:
- Enhanced security and resilience by developing the EU's digital capabilities whilst maintaining open markets. This is important to reduced fraud rates and increased financial security for consumers. The report states that the financial sector's increased use of digital technology does not equate to a higher security threat but to remain on track, financial institutions must have the flexibility to choose the best service providers for their needs.
- Growth and competitiveness: If Europe become a digital finance leader it will be positive for rising living standards, high-quality job creation, and a GDP-boost. To that end the report points out to the importance of prioritising regulatory sandboxes over prescriptive regulatory requirements, and by incorporating global standards. Regulation must be based on principles and guidelines to be able to anticipate and evolve with the market and technology.
- Data-driven sustainability gains by speeding up data sharing through contracts via encouraging standardized data formats across sectors: The combination of data from different sectors holds the greatest potential for delivering new services and experiences for people and businesses. For example, by including climate data in customers' financial activity, financial institutions can help consumers to be aware of how much CO2 they generate, how to offset and reduce it. With these and other examples, the report shows how improved customer experience by making public data sets available to the financial ecosystem can drive better AI inferences.
- Societal inclusivity: If properly harnessed, digital finance can make financial services more accessible and affordable to underserved populations by lowering transaction costs, reducing the need for physical infrastructure, and allowing individuals to conduct financial transactions through mobile devices. The report recommends that the EU should consider introducing basic financial education into school curriculums. Financial literacy would give citizens the financial freedom to make sound financial decisions.