What is digital finance?
Digital finance is the term used to describe the impact of new technologies on the financial services industry. It includes a variety of products, applications, processes and business models that have transformed the traditional way of providing banking and financial services.
While technological innovation in finance is not new, investment in new technologies has substantially increased in recent years and the pace of innovation is exponential. We now interact with our bank using mobile technology. We make payments, transfer money and make investments using a variety of new tools that were not there few years ago. Artificial intelligence, social networks, machine learning, mobile applications, distributed ledger technology, cloud computing and big data analytics have given rise to new services and business models by established financial institutions and new market entrants.
All these technologies can benefit both consumers and companies by enabling greater access to financial services, offering wider choice and increasing efficiency of operations. They can also contribute to bringing down national barriers and spurring competition in areas such as
- online banking, online payment and transfer services
- peer-to-peer lending
- personal investment advice and services
The financial services industry has been influenced by innovative technology, which can benefit both consumers and companies by giving a greater access to financial services, offering wider choice and increasing efficiency of operations.
Numerous opportunities involve also risks and challenges, which require monitoring and regulation. Therefore, the Commission has put further many initiatives to embrace the innovations, preserve market stability and integrity, and protect financial investors as well as consumers.
Digital finance topics
As a digital form of central bank money, the digital euro would offer consumers and businesses more choice, reinforce the EU’s digital transition, and strengthen the international role of the euro.
"Open finance” proposal establishing a framework for responsible access to individual and business customer data across a wide range of financial services.
The framework on digital operational resilience focuses on managing the risks associated with the financial sector relying more on software and digital processes.
A comprehensive framework for crypto-assets and related services to ensure that the Union financial services are fit for the digital age.
Digital Finance Platform and the Data Hub
Following up on the digital finance strategy, the Commission established a platform aimed at supporting innovation in finance and building a true single market for digital financial services. The Data Hub will make available to participating firms specific sets of non-public, non-personal data, with a view to enable them to test innovative products and train AI/ML models. The initiative is part of the European strategy for data from 2020 through which the EU commits to boosting the development of trustworthy data-sharing systems.
Policy making timeline
- 18 June 2024Consultation - AI in the financial sector
- 18 June 2024Workshops - AI in the financial sector
- 24 October 2022Report - Open finance
The report on open finance is a key outcome of the Expert Group on the European Financial Data Space. The report describes elements of an open finance ecosystem as seen from the perspective of the Expert Group.
- 10 May 2022Consultation - Open finance
Targeted consultation on the framework and data sharing in the financial sector. It will inform the Commission on the application and impact of PSD2 and on the views on open finance.
End date: 5 July 2022 - 5 April 2022Consultation - Digital euro
Targeted consultation on a digital euro, complementing the ECB’s public consultation.
End date: 16 June 2022 - 2 February 2021Technical advice - Digital finance and related issues
Request to EBA, EIOPA and ESMA for technical advice on digital finance and related issues. The Commission requested the technical advice of the ESAs based on its digital finance strategy, which sets out its work for the coming four years.
- 24 September 2020Legislative proposal - Digital finance package
- 1 July 2021Events - Digital finance outreach
The digital finance outreach is a series of events on fintech and digital innovation in the financial sector.
- 19 December 2019Consultation - Crypto-assets & digital operational resilience
The Commission launched two consultations
- 13 December 2019Final report - Expert Group on Regulatory Obstacles to Financial Innovation
Final report of the Expert Group on Regulatory Obstacles to Financial Innovation: 30 recommendations on regulation, innovation and finance.
Expert Group on Regulatory Obstacles to Financial Innovation publishes recommendations on how to create an accommodative framework for FinTech in the EU. - 20 June 2018Meeting - EU FinTech Lab
First meeting of the EU FinTech Lab. The EU FinTech Lab intends to raise the level of regulatory and supervisory capacity and to share knowledge about new technologies.
- 8 March 2018Legislative proposal - FinTech
FinTech action plan: For a more competitive and innovative European financial sector.
Communication from the Commission setting out steps to encourage a wider and more balanced uptake of technological innovation in the financial sector
- 8 March 2018Call for applications - Regulatory obstacles to financial innovation expert group
The expert group will assist the Commission by providing expertise on the regulatory obstacles preventing uptake of innovative FinTech solutions
- 23 March 2017Consultation - FinTech
Public consultation on FinTech: a more competitive and innovative European financial sector.
End date: 15 June 2017
The report on open finance is a key outcome of the Expert Group on the European Financial Data Space. The report describes elements of an open finance ecosystem as seen from the perspective of the Expert Group.
Targeted consultation on open finance framework and data sharing in the financial sector
Targeted consultation on a digital euro
The Commission requests the technical advice of the ESAs based on its digital finance strategy, which sets out its work for the coming four years.
The Commission adopts package to support innovative financial products, and to set rules on crypto-assets and digital resilience.
The digital finance outreach is a series of events on fintech and digital innovation in the financial sector.
Public consultation an EU framework for markets in crypto-assets
This consultation aims at gathering stakeholders’ views on the need for legislative improvements within the financial services acquis
Expert Group on Regulatory Obstacles to Financial Innovation publishes recommendations on how to create an accommodative framework for FinTech in the EU
The EU FinTech Lab intends to raise the level of regulatory and supervisory capacity and to share knowledge about new technologies.
Communication from the Commission setting out steps to encourage a wider and more balanced uptake of technological innovation in the financial sector.
The expert group will assist the Commission by providing expertise on the regulatory obstacles preventing uptake of innovative FinTech solutions
The aim of this consultation was to gather stakeholders' views on the impact of new technologies on the European financial services sector
Digital finance package
Based on broad public consultations and the digital finance outreach, the European Commission adopted on 24 September 2020 a digital finance package.
The package includes a digital finance strategy, and legislative proposals on crypto-assets and digital resilience, and a renewed retail payments strategy. The goal is to create a competitive EU financial sector that gives consumers access to innovative financial products, while ensuring consumer protection and financial stability. The package supports the EU’s ambition for a recovery that embraces the digital transition. Digital financial services can play an important role in modernising the European economy across sectors and turning Europe into a global digital player.
By making rules more digital-friendly and safe for consumers, the Commission aims to exploit synergies between high innovative start-ups and established firms in the financial sector while addressing associated risks.
More on the digital finance package
Digital finance outreach 2020
The digital finance outreach 2020 is a series of events organised in collaboration with the Member States in February-June 2020 on fintech and digital innovation in the financial sector to prepare the new EU digital finance strategy. In parallel, the European Commission organised online roundtable discussions with key stakeholders, open to the public.
In the context of the digital finance strategy for Europe, the digital finance outreach 2020 events will continue in order to bring the proposed actions closer to the citizens. They will give the opportunity to stakeholders and the public to listen to the European Commission’s experts presenting the new digital finance package and answer to their questions.
More on the digital finance outreach
Commission's action plan on FinTech
In March 2018 the European Commission adopted an action plan on FinTech to foster a more competitive and innovative European financial sector. The action plan sets out 19 steps that the Commission intends to take to
- enable innovative business models to scale up at EU level
- support the uptake of new technologies such as blockchain, artificial intelligence and cloud services in the financial sector
- increase cybersecurity and the integrity of the financial system
These initiatives mainly aim to enhance supervisory convergence toward technological innovation and prepare the EU financial sector to better embrace the opportunities brought by new technologies. This should enable innovative digital finance solutions to be rapidly rolled out across the EU and benefit from the scale economies of the single market, while preserving financial stability and ensuring consumer protection.
The action plan is part of the European Commission's efforts to build a capital markets union and a true single market for consumer financial services. It is also part of its drive for a digital single market.
More on the action plan on FinTech
Digital euro
The digital euro, a digital form of central bank money, would offer greater choice to consumers and businesses in situations where physical cash cannot be used. However, the digital euro would be a complement to cash, which should remain widely available and useable.
The European Central Bank (ECB) and the European Commission services are jointly reviewing at technical level a broad range of policy, legal and technical questions emerging from a possible introduction of a digital euro, taking into account their respective mandates and independence provided for in the Treaties.
Following up on the Digital Finance Strategy, the Commission established a platform aimed at supporting innovation in finance and building a true single market for digital financial services. The Digital Finance Platform was created to:
- serve long-standing requests identified by stakeholders,
- to develop closer relationships between innovative firms (FinTechs and established financial entities) and NCAs (national competent authorities),
- to set up an entry point into the single market.
The Digital Finance Platform is a collaborative space that offers practical tools designed to facilitate the scaling up of innovative firms across Member States.
Within the Digital Finance Platform, the Data Hub will make available to participating firms specific sets of non-public, non-personal data, with a view to enable them to test innovative products and train AI/ML models. The Data Hub will therefore complement national sandboxes and innovation hubs that typically focus on facilitating the dialogue between regulators and innovators for private and public sector use cases, complementing the existing Digital Finance Platform’s features on cross-border testing.
Therefore, the Hub will eventually make it easier to develop products that depend on data-intensive Artificial Intelligence systems (AI) to promote the EU companies’ competitiveness. The initiative is part of the European strategy for data from 2020 through which the EU commits to boosting the development of trustworthy data-sharing systems through four broad sets of measures. These measures include for example facilitating the reuse of public sector data that cannot be made available as open data.