Olli Rehn Dr, Member of the Board of Bank of Finland Digital transformation in the financial industry - potential and challenges Second Annual Conference on FinTech and Digital Innovation: Regulation at the European Level and Beyond, Brussels, 27 February 2018

1. Unrestricted
Bank of Finland
Digital transformation in the financial
industry – potential and challenges
2nd Annual Conference on FinTech and Digital Innovation:
Regulation at the European Level and Beyond
127.2.2018
Olli Rehn

2. Suomen Pankki – Finlands Bank – Bank of Finland Unrestricted
Digitalisation creates new business models
and increases competition
27.2.2018 Olli Rehn 2
Technology
• Computing power
• Broadband access
• Mobile devices
• AI
Regulation
• FinTech action plan
• PSD2
• GDPR
• MIFID II
Consumer
behaviour
• 24/7
• Always online
• Social media
• Seamless experience
Digital
Transformation

3. Suomen Pankki – Finlands Bank – Bank of Finland Unrestricted
The playing field of payments is changing:
Is it an old game with new rules – or an entirely new game?
Olli Rehn 327.2.2018
Photo: Wikipedia/Official Olympic Report Photo: Kari Kemppainen

4. Suomen Pankki – Finlands Bank – Bank of Finland Unrestricted
Importance of payments for Finnish banking sector
27.2.2018 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
would be required to
compensate
- 4 %
in total income
What if
half of net income
from payments were
to vanish?

5. Suomen Pankki – Finlands Bank – Bank of Finland Unrestricted
Importance of digital skills and financial literacy
 Financial literacy skills are a necessity in the digital age
 Financial inclusion – nobody must be left behind
 All citizens need at least basic knowledge on cyber security and
data security
 Cooperation among the promoters of financial literacy is
extremely important
27.2.2018 Olli Rehn 5

6. Suomen Pankki – Finlands Bank – Bank of Finland Unrestricted
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 money transfer
– Securities clearing and settlement
 Central banks developing centralised systems for real-time payments
– TARGET Instant Payment System (TIPS)
– TARGET2-Securites (T2S)
27.2.2018 Olli Rehn 6

7. Suomen Pankki – Finlands Bank – Bank of Finland Unrestricted
Summary
 Europe has the potential to become a leader in the digital
transformation of the financial industry – for the benefit of the
whole society
 This calls for strong innovation and a flourishing FinTech
ecosystem
 Balance act between innovation, and consumer protection, and
financial stability
 Underlines the growing need for digital skills and financial literacy
27.2.2018 Olli Rehn 7