Olli Rehn Member of the Board of Bank of Finland Chair of the Finnish Financial Supervisory Authority (FIN-FSA) FIN-FSA’s annual seminar on financial services Helsinki, 22 November 2017

1. Bank of Finland
Digital transformation in the financial
industry: what’s good for the society?
FIN-FSA Annual Conference - Financial Services 2022
Helsinki, 22 November 2017
122.11.2017
Olli Rehn

2. Suomen Pankki – Finlands Bank – Bank of Finland
Digitalisation creates new business models and
increases competition
Digitalisation
• Computing power
• Broadband
connectivity
• Mobile devices
• AI
Regulation
• Digital Single Market
• Capital Markets Union
• FinTech action plan
• PSD2
• MIFID II
Consumer
behaviour
• Awareness
• Actively online
• Social media
22.11.2017 Olli Rehn 2

3. Suomen Pankki – Finlands Bank – Bank of Finland
The playing field of payments is changing:
Is it an old game with new rules – or an entirely new game?
Olli Rehn 322.11.2017
Kuva: Wikipedia/Official Olympic Report Kuva: Kari Kemppainen

4. Suomen Pankki – Finlands Bank – Bank of Finland
Importance of payments for Finnish banking sector
22.11.2017 Olli Rehn 4
EUR 0.5 billion
Net income from
payments
8 %
of total income
19 %
of operating profit
10 %
-- increase in net
interest income that
would be required to
compensate the losses
- 4 %
in total income
What if
half of net income from
payments were to
vanish?

5. Suomen Pankki – Finlands Bank – Bank of Finland
Importance of the FinTech ecosystem
 FinTechs can offer consumers enhanced user experience through innovative
services
 Need for FinTech hubs, accelerators and mentoring
 Effort must be put into international cooperation
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6. Suomen Pankki – Finlands Bank – Bank of Finland
Size of domestic banking sector will grow to ca.
400% / GDP – well above the average in the EU
22.11.2017 Olli Rehn 6
0
100
200
300
400
500
2015Q4 2016Q4 2017Q2 2018e
Others Nordea
Source: FIN-FSA.
% of GDP
The size of the Finnish Banking sector

7. Suomen Pankki – Finlands Bank – Bank of Finland
Importance of digital skills and financial literacy
 Digital skills are at high level in Finland.
 The minority unable to use digital financial services must not be neglected.
 All citizens need at least basic knowledge on cyber security and data
protection.
 Adequate financial literacy skills are a necessity in the digital age.
 Cooperation among the promoters of financial literacy is extremely important.
 One example of potential measures to curb over-indebtness is the positive
credit register.
22.11.2017 Olli Rehn 7

8. Suomen Pankki – Finlands Bank – Bank of Finland
ICOs and cryptocurrencies price bubble
22.11.2017 Olli Rehn 8

9. Suomen Pankki – Finlands Bank – Bank of Finland
Blockchain vs. centralised payment systems
 Blockchain is of interest for financial sector actors from the perspective of new
applications
 Promising applications in the financial sector:
– Interbank international credit transfer
– Securities clearing
 Central banks are creating centralized infrastructure for real-time payments
– TARGET Instant Payment System (TIPS)
– TARGET2-Securites (T2S)
22.11.2017 Olli Rehn 9

10. Suomen Pankki – Finlands Bank – Bank of Finland
Summary
 Finland has potential to become a success story in the financial
industry’s digital transformation – for the benefit of the whole society
 This calls for strong innovation and a flourishing FinTech ecosystem
 And for a balance between innovation and technology, on one hand,
and customer protection and financial stability, on the other
 It underlines the growing need for digital skills and financial literacy
22.11.2017 Olli Rehn 10