In 2021, the Bank of Finland continued to monitor the digitalisation of financial intermediation and analyse the consequences of change. During the year, it published an article on the diversification of financial intermediation in Finland, conducted a survey on the use of digital channels in the Finnish banking industry, and promoted greater international cooperation on digitalisation and innovation.

In the summer, the Bank published a Bank of Finland Bulletin article on the diversification and digitalisation of lending in Finland (in Finnish). The article explained how the effects of digitalisation are evident in lending to households and companies and described the sort of factors that apply to the Finnish financial sector.

Although the majority of loans in Finland are still granted by banks, the number of new lenders and new approaches to lending is increasing both within the banking sector and outside it.

The Bank of Finland broadened its approach to the monitoring of digitalisation by means of a survey on the use of digital channels in lending. The survey focused on how the banks have exploited digital channels in lending, such as mobile or online banking, and how relevant to lending by the banks external channels (e.g. comparison and competitive bidding websites) are.

Besides the question of digital channels, the survey also sought to discover how great a proportion of decisions to grant loans were made automatically with no actual employee involved.

Digital channels are hugely important in lending

The results suggest that digital channels play a major role in lending, although branches still have their part to play.

For example, loan applications by households were usually made digitally, but at the later stages of granting loans digital services were used less.

An exception to this trend was unsecured consumer loans, most of which were granted via digital channels, with no need for the personal involvement of branches, for example. Unsecured consumer loans tended to be granted particularly often on the basis of an automatic decision, while with other loan products the number of automatic decisions was far smaller.

Loan sales via non-bank channels was an especially common phenomenon with ‘digibanks’, which have no high street branches.

International cooperation in pursuit of a broader understanding of digitalisation

The importance of greater cooperation between central banks internationally was stressed. One example of this is the collaboration between the European Central Bank (ECB), the Eurosystem NCBs and BIS (the Bank for International Settlements) concerning the establishment of centres of the BIS Innovation Hub in the euro area, actually in Frankfurt and Paris.

The mission of the BIS Innovation Hub is to identify and share views on trends in financial technology, to develop technology to improve the functioning of the global financial system and to act as a platform for dialogue between central bank experts on matters of innovation.

The Innovation Hub’s programme is structured around six core themes regarded as important for both the Hub itself and the central banks. These include, for example, digital currency and green finance.

The BIS Innovation Hub has launched the BIS Innovation Network, which is aimed at enhancing cooperation between central bank experts in matters falling under the Hub’s mandate.

The network convened for the first time in January. It consists of representatives of various central banks around the world, including two from the Bank of Finland.