Guest viewpoint: Seizing the digital opportunity in Europe

The debate is far from over among European Union lawmakers on the European Commission’s plan to boost competitiveness, enhance security, and bolster economic resilience in Europe – the so-called 2025 Commission work programme. It aims to achieve this by simplifying EU regulations and reducing red tape, to ultimately foster ‘a more secure and prosperous’ Union.

What the consequences of these deliberations will be is anyone’s guess, but one thing is certain: Europe and its financial sector are facing challenges that will have to be addressed sooner rather than later.

A major transformation is underway, driven by digitalisation, sustainability, and demographic shifts. Digitalisation is at the forefront, reshaping financial services through technological advancements and the use of AI. This is necessary as consumer expectations are shifting towards digital solutions too.

Digitalisation has far-reaching consequences throughout the financial services supply chain and should be embraced rather than feared. In the case of cross-sectoral regulations such as DORA (Digital Operational Resilience Act) and FIDA (Financial Data Access) in particular, there has been some chagrin and concern about compliance costs – precisely the kind of thing the European Commission wants to address in its work programme. Lagging behind in an analog world, however, is a much riskier option.

The question, therefore, is not if, but how, financial firms can strategically adapt to this digital world. Below I highlight some of the trends that provide opportunity and conclude that the financial services industry should welcome new digital initiatives rather than lobby against them.

The regulatory push for digitalisation

European financial institutions have faced a growing web of regulations aimed at reshaping industry standards. DORA mandates stronger cybersecurity measures, ensuring financial firms can withstand digital threats. FIDA will expand the current Open Banking principles, requiring institutions to facilitate seamless access to consumer financial data across banking, investment, insurance, and pensions upon client request. Meanwhile, the AI Act introduces governance frameworks for artificial intelligence applications in finance.

While increasing compliance costs, these regulations also promote greater transparency, security, and consumer empowerment. Forward-thinking firms will recognise that these initiatives not only constitute a legal necessity but also a strategic advantage in an increasingly digital-first financial landscape.

Open Finance is the successor to Open Banking, which refers to customers’ ability to grant consent for their bank to share financial data with other service providers. These providers can use the customer’s data for various purposes, such as comparing account and transaction history with different financial service options, collecting data to create marketing profiles or executing new transactions and account modifications on behalf of the customer. The FIDA regulation aims to establish Open Finance, which is undergoing three-way negotiations between the European Commission, European Council and European Parliament.

“The question is not if, but how, financial firms can strategically adapt to a digital world”

Jorik van Zanden

Although FIDA still has to come to fruition (following a brief scare that it would be cancelled altogether as part of the 2025 Commission work programme), all financial institutions should already prepare themselves for a world of Open Finance. Instead of viewing it merely as a compliance requirement, they should embrace it as a tool to enhance customer experience, drive innovation and remain competitive in an evolving financial ecosystem.

Pension accessibility and financial inclusion

A key example of successful digital finance is the ‘pension dashboard’. European consumers often struggle with fragmented pension information, making it difficult to plan effectively for retirement.

A regulatory-backed pension tracking service, such as the Dutch mijnpensioenoverzicht.nl portal, offers a glimpse into the future of integrated retirement planning. By consolidating pension data across multiple providers, a platform like this provides a clear, real-time overview of retirement savings, allowing individuals to make informed decisions.

While a focus on financial literacy remains important, accessibility is the real game-changer. Reducing complexity through digital tools ensures that financial products become more transparent and lowers dependency on intermediaries and the associated high costs of advice.

Building on pension dashboards, when combined with data sharing of other financial products, such as mortgages, insurance products and investment accounts, consumers can get a more holistic view of their personal finances and, with the help of cheap(er) advice, act accordingly. Financial education on steroids, if you will.

Of course, not all financial institutions are created equal, and pension fund concerns about the costs associated with this data and their ultimately being borne by its members are valid. However, excluding pension funds would waste a huge opportunity for holistic financial planning – as pensions are both one of the most important and complex elements.

Aside from the consumer perspective, increasing digital maturity may also be a way to boost the competitiveness of Europe and, in turn, the welfare of Europeans.

EU vs US: a competitive perspective

Digital finance is not just an internal EU matter but also a key factor in global competitiveness. The US has traditionally led the way in financial innovation due to its market-driven approach, deep venture capital ecosystem and fintech dominance. This has been the cause of some frustration in Europe, as the EU’s capital markets have been lagging for years and for various reasons, as neatly summed up in reports such as those from former European Central Bank president Mario Draghi and former Italian prime minister Enrico Letta. To quote Draghi: “With the world on the cusp of an AI revolution, Europe cannot afford to remain stuck in the ‘middle technologies and industries’ of the previous century.”

Europe does not lack capital to invest in those technologies but it is misallocated to low-yield savings and cash holdings. Digital financial services can help unlock this capital by making investments more accessible, automating asset allocation and reducing transaction costs.

To sum up: digital transformation plays a crucial role in what I have dubbed DSG: digitalisation, sustainabilisation, and gerontification. These three megatrends will influence societies, economies, industries, and cultures for decades to come and require proactive engagement from all stakeholders. Moreover, these trends are deeply interconnected. Sustaining economic growth and preserving welfare systems in the face of demographic change will require innovative solutions to compensate for labour shortages — chief among them, technology.

Digitalisation is one of the antidotes against the rapid ageing of the European continent and should be embraced, with all due consideration for safety and privacy concerns. The financial sector should engage actively with European policymakers, including the European Parliament, to not only address concerns but also come up with solutions for a functioning digital market.

A wide range of well-designed and properly regulated financial products accessible to all Europeans benefits everyone. The consumer, by democratising financial products; society, by allowing access to proper financial products which will play a much larger role due to increased pressure on welfare states; and the broader economy, as it may funnel dormant cash towards the financial markets to benefit from growth.

It is time for Europe to take up the gauntlet.

Jorik van Zanden is a strategy consultant at AF Advisors, a researcher at Utrecht University, and co-founder of Jasper Forum, a global discussion group for retirement and capital market experts