The future of retail financial services

In response to rising competition and increasingly demanding consumers, established banks and newcomers alike are using digital technologies to develop new products, processes and models. This wide structural transformation is triggering specific risks that European and national regulators are gradually addressing. The range of issues is relatively broad: cyber security, digital interoperability, personal data protection, new norms for algorithms, contribution to further cross-border sales, digital information disclosure, etc. Ambitious regulations (GDPR, PSD2, MiFiD, AML, etc.) in turn make it necessary for established players to innovate in order to comply with the new rules (the so-called RegTech).

It is therefore essential to put in place an appropriate policy framework to stimulate innovation to ensure a balanced digital transformation of financial service providers. Different initiatives are being taken at the national level, albeit with varying degrees of success. Depending on the environment, policymakers are implementing some combination of: subsidies for innovation labs and accelerators, regulatory sandboxes (relaxation of specific compliance processes for a given time), tax cuts, lower registration costs, financial education for techies and better access to funding for startups. Questions remain on how and to what extent European regulators could contribute further to improve such policies.