Study on the role of digitalisation and innovation in creating a true single market for retail financial services and insurance : executive summary

As in many sectors of the economy, digital technologies are transforming retail financial services and non-life insurance. This digital transformation will probably continue to shape these two sectors in the coming years, and has already resulted in new products and processes that are developed and implemented by 'traditional' providers, such as banks and insurance companies. In recent years, however, new companies (defined as FinTech or InsurTech companies) have emerged on the market by developing and distributing products, either for banks and insurance companies, or for consumers. Companies that have been traditionally active in other sectors such as asset management, information and communication technology are also examining the possibility of offering retail financial services and non-life insurance. Some of the new entrants might contribute to market integration with different expansion strategies. While the traditional providers have to deal with legacy issues such as local office networks and contracts with agents, the new entrants do not necessarily need a local presence to distribute their products. Hence, with a large part of the entire product/service being delivered virtually, the location of the provider becomes less relevant. It should thus become easier to offer services directly across borders. The direct cross-border sales have been negligible to date, with the exception of some niche segments. For example, on average, only 0.8% of household loans granted in the euro area are extended on a cross-border basis. The only exceptions that have been identified in the study are Luxembourg for loans and accounts, owing to the significant number of cross-border commuters, and the UK for housing loans, mirroring the high volume of UK real estate purchased by overseas buyers. This study focuses on the crossroads between digitalisation and direct cross-border activity. More specifically, the study assesses whether and to what extent digitalisation can contribute to the creation of a true single market for retail financial services and non-life insurance.