BRUSSELS, 31 August 2016 – WSBI agrees with the Chinese Presidency that long-term economic growth is based on innovation and new business models for technological development. WSBI finds that the G20 members have a key role to play in facilitating it. Indeed, WSBI finds that digitisation changes how customers and banks communicate with each other. Keeping pace with the speed of digitisation is a challenge for all banks as well as regulators. For the WSBI members, digitisation offers opportunities to increase the customer proximity which has always been a characteristic of the savings and retail banks. Overall, WSBI thinks that promoting digital infrastructures and developing interoperable e-identification will further push forward digitisation and enable more consumers to participate in the digital era.
Policymakers, regulators and supervisors worldwide need to keep abreast of digital banking breakthroughs. Their job is to set a regulatory framework that fosters innovation while simultaneously ensuring the security, data and consumer protection essential to preserving trust in the financial system. An enabling regulatory framework promotes transparency and accessibility for all stakeholders, which is at the core of any robust, effective and inclusive digitised banking universe.
With regard to data, for WSBI, the sensitive use and transfer of personal client data is essential. Every day banks deal with vast - and growing - amounts of data. The savings and retail banks are aware of the responsibility put upon them by the consumer who trusts them with their data. Clear rules on data flow can uphold consumer trust as well as boost business opportunities. It is important that data can flow freely within the same company (parent company and subsidiaries), including the specific structures of some savings banks. Third companies, however, should not have access to client data which a company has collected on its own. Regarding data markets, WSBI sees a business potential if a clear legal framework takes away legal uncertainty. As cloud computing develops, there must be transparency as to where data is stored, how it is protected, and how it can be transported. WSBI considers it essential that contracts with cloud providers are negotiable and that cloud service providers do not dictate all terms of an agreement. Contracts on the use of a cloud service need to clearly indicate the conditions of the storage taking into account possible future scenarios (termination, resumption of services, location of data, data portability).
Digital tools such as online platforms or automated financial advice change the ways of communicating and exchanging information. With respect to online platforms, the economy at large is unlikely to benefit from any legislative activity, as legislation in one country or one area may hinder the businesses located there as they have to compete in a global market. Automated financial advice could enable more customers than ever to access financial advisory services. However, those tools needs to be subject to the same supervisory requirements as flesh-and-blood advisers and should be treated as human advice under the relevant applicable legislation.
Another critical building block is electronic identification. Cross-border financial business can be boosted by interoperable e-identity tools. For the savings and retail banks making authentication tools more easily usable for consumers is a key concern. One issue for cross-border sales is that the possibilities in different countries differ very much due to national laws and the interpretation thereof. WSBI finds that a guidance on electronic identification that also includes a study on best practices for identity verification would be key to address the potential risks of digitisation. This study could be conducted by the Global Partnership for Financial Inclusion (GPFI), the Alliance for Financial Inclusion (AFI) or the World Bank for example. We find that such a guidance would foster both financial inclusion and safe financial digitisation, two main pillars of economic sustainability.
As indicated above, with the growing digitisation of services, fighting digital exclusion gains importance. The savings and retail banks follow a socially responsible approach to business and aim at bringing
about a return to their societal roots. Most financial education programmes carried out voluntarily by
WSBI members consider the digital dimension to help citizens (including customers) to get acquainted with digital tools. Apart from that, WSBI calls on the international institutions to support mechanisms that are needed to avoid financial exclusion e.g. by investing in digital infrastructure, such as high-speed broadband, and by initiating awareness campaigns to promote internet usage.
Last but not least, so called Fintechs are often perceived as accelerators of digitisation. To ensure a level playing field, WSBI considers it essential that the same rules apply to the same business with the same risks. Equal treatment in this sense is key to a healthy competition and to preventing any form of regulatory arbitrage. Currently, banks have to comply with much stricter rules than Fintechs in some areas such as customer identification and lending procedures. At the same time, however, innovation should not be stifled by introducing a too rigid regulatory framework. Indeed, where strong consumer protection and competition laws exist, legislators should sit back for a while and let market players create, test, fail, improve, and deliver.