European Banking Federation On The EU’s Shift To Digital, Data-Driven Financial Services
The pandemic has shifted priorities in regulatory policy tied to the financial services industry — and for Europe, it is heralding the emergence of a data-driven economy.
In an interview with Karen Webster, the European Banking Federation’s (EBF) Alexandra Maniati, Director of Cybersecurity & Innovation, said the European banking industry is, increasingly, embracing the cloud to pivot to new financial services and products across the Continent.
The EBF represents the vast majority of the European banking sector through its membership, spanning 32 national banking associations from across Europe, which in turn encompass more than 3,500 banks.
Maniati noted the transformation had been in place well before COVID and has stretched back over five years, but has seen some urgency in recent months.
In April, for example, the EBF, European Association of Co-operative Banks (EACB) and the European Savings and Retail Banking Group (ESBG) said that tech-driven priorities include the development of instant payments capabilities across the EU and robust data sharing.
The trends toward modernizing the banking system were only accelerated by lockdowns and shutdowns of brick-and-mortar locations.
“If there is one lesson to be learned from the pandemic — and I am sure I am probably the thousandth person to mention it — it has been this overnight need for remote working.” That shift has underscored the banking sector’s need to have a robust and resilient tech infrastructure in place to allow banks to continue to function and continue serving customers.
Moving into the Digital Age
Late last month, the European Commission adopted a comprehensive package that represents what the EC heralded as a “major step” toward bringing the EU more fully into the digital age. The overarching principles and goals, as reported late last month, include uniformity of regulation — a “same activities, same risks, same rules, same supervision” principle; a movement toward cross-sectional data sharing; minimum security requirements and stronger sovereignty in payments through pan-European initiatives (and technology such as crypto assets).
The banking sector has always been driven by technology, said Maniati, and the cloud can help underpin that resilience. Earlier this year the EBF published three technical papers that aimed to offer the financial services ecosystem a harmonized oversight framework and better understanding on how cloud services and technology (and outsourcing) can streamline operations — and the risks involved.
The great digital shift has spurred banks to examine even the most basic levels of services and bring them online. Webster noted that in other parts of the world, processes that required “wet signatures” now can be completed with the use of digital signatures — a change from paper-based processes that has also taken root in Europe.
The digital framework promoted by the EC advocates identity based on the e-IDAS framework, leveraging existing national ID schemes and public/private partnerships to achieve scale, and allow banks’ corporate and consumer customers to navigate commerce and financial services across borders in a fluid way.
Interoperability is Key — and so are Partnerships
With any tech-driven, pan-European effort, interoperability is key, noted Maniati, who pointed to the continued adoption of public and hybrid cloud solutions as a way to make data more easily exchangeable. “There are at least seven countries in the European union which already have digital identity schemes — and we would like to see existing efforts be brought together rather than reinventing the wheel.”
Looking across the various financial services and payments that are moving to the digital realm, FinTechs and banks are intersecting and, increasingly, collaborating, said Maniati. Joint efforts between tech-savvy upstarts and traditional FIs underscore the need for an “activity based” model of regulation and governance — again, hearkening back to the “same services, same activities, same regulation, same supervision” approach.
Maniati noted that uniform, activities-based framework is easier said than done as the lines become blurry between specific activities where payments are embedded into the customer journey (picture Uber’s core ride-hailing, for example).
Ready for Digital Currencies?
As to whether the data-driven, digital economy in Europe is ready for digital fiat — Maniati noted that the complicated issues surrounding, say, the digital Euro go well beyond the technical realm as central banks push cashless initiatives. These are issues with more strategic implications — and we don’t have any precedent here.
By and large, said Maniati of EU-wide initiatives: “The digital agenda is going forward — and not only because of COVID-19,” said Maniati.