COVID-19 has sped up developments in digitalisation, which was already under way on the financial markets. The models and structures of financial intermediation are changing, and the industry is seeing the presence of new digital actors. Meanwhile, the old operators are also investing heavily in technological development.

Digital actors are taking on growing importance in financial intermediation.

For example, digital banks with no network of branches now account for a continually growing share of the aggregate stock of Finnish household consumer credit. At the same time, the importance of operators outside the banking sector is increasing in the area of financial intermediation.

The Bank of Finland actively monitors the effects that the new operators and their approaches are having on financial intermediation, the changing roles and the risks involved.

To analyse these effects, the Bank of Finland has begun to deploy a monitoring process that covers the entire financial sector, with categories being established for different groups according to their characteristics and business models.

It is important to monitor new business models to preserve financial stability

Digitalisation makes possible a broad range of business models for financial intermediation. Crowdfunding, peer-to-peer lending and digital banking, for example, all have their very own special features.

The Bank of Finland continually aims to keep abreast of changes in financial intermediation and therefore actively monitors the extent of the influence of the various business models and their changes.

In addition, the Bank analyses the risks associated with these business models and produces data to aid, for example, decision-making connected with financial stability.

Digitalisation allowed financial intermediation to continue also during a time of crisis

In 2020, COVID-19 sped up the development of a digitalisation process that was already under way. As the virus spread, the customer service lines of banks became congested, as customers applied for loan repayment holidays.

The banks quickly developed technological solutions to deal with the congestion problem and advised their customers to start using digital channels.

The Bank of Finland started to keep track of the number of loans granted by banks that were being taken out via digital channels.

From the angle of financial stability, the services and channels made possible by digitalisation played a major role in the continuation of financial intermediation during the coronavirus pandemic.

Analyses conducted by Bank of Finland extend beyond banking sector and across borders

With the growing role of actors outside the banking sector, any analysis of financial intermediation must also be extended more robustly to the non-banking sector.

Back in March 2019, the Board of the Bank of Finland in fact decided to extend data collection to other financial institutions.

In 2020, the Bank created a new data collection process regarding financial intermediation outside the credit institutions. The collection of statistical data as from the start of 2021 will extend, for example, to credit institutions’ finance companies and companies providing consumer credit.

Digitalisation also promotes the internationalisation of financial intermediation. More attention must be paid in the monitoring process to financial institutions that grant loans to other countries.

Studies conducted by the Bank of Finland suggest that in Finland, too, there is a substantial amount of consumer borrowing from the other Nordic countries.

The monitoring of this cross-border lending is a key part of the Bank of Finland’s analysis of approaches to digitalisation, and relies very much on cooperation between the Nordic countries.