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    EU Authorities Issue Updates on DSA and Digital Transformation Survey

    February 17, 2023

    The European Commission (EC) announced that all online platforms and search engines (except micro and small enterprises) will publish their user numbers in the European Union, for the first time, as per the provisions of the Digital Services Act (DSA) and seek consultation on the DSA enforcement procedures, with the comment period ending on March 16, 2023. Additionally, the European Central Bank (ECB) Banking Supervision published the results of a survey on digital transformation and the use of fintech.

    The survey on digital transformation was conducted among 105 large banks that are the direct supervision of ECB, with the goal of assessing the status of their digital transformation. The results of the survey vary across banks, highlighting the following findings in six key areas:

    • Digital strategy and Key Performance Indicator (KPI) steering—Main objectives are becoming more customer-centric in how products and services are offered as a lever to increasing revenues and improving operational efficiency by automating processes and modernizing information technology infrastructures. However, the results show that most banks still face challenges in developing KPIs to monitor digital progress, quantify the impact of digital transformation on their profitability and track effectiveness of implementation.
    • Digital business—Most digitalization strategies are focusing on improving the customer experience and offering digital services and products 24/7. However, keeping track of digital customers and sales remains a challenge.
    • Investments and resources—Most banks do not yet have a dedicated digital transformation budget, but on average one fifth of the IT budget is spent on digitalization.
    • Governance and cooperation—Most banks have in place a coordination body to steer the design and implementation of the digital strategy. The 2nd and 3rd lines of defense are often involved in the implementation and monitoring of the digital strategy. With regard to cooperation, banks prefer to cooperate with external partners, mostly by buying in services (Software as a Service—SaaS) and using consultants. The majority of banks (61%) make use of at least one form of cooperation.
    • Use of innovative technologies—Cloud is most commonly used and seen as a foundation for the use of other technologies. Also, application programming interfaces (APIs) and artificial intelligence are used by most of the banks with increasing business relevance, whereas Distributed ledger technology is used by a very limited number of banks, with crypto-related activities.
    • Risks—Banks face heightened risks of third-party dependency, money laundering, fraud, and cyber-security. These risks require further monitoring and must be taken into account in banks’ governance and risk appetite frameworks. 

    Going forward, ECB plans to continue the work on digital transformation by complementing this preliminary analysis with further investigations in specific areas including targeted reviews and on-site inspections, which will be conducted in the course of 2023 and communicated publicly via the supervision newsletter and website.


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    Keywords: Europe, EU, Banking, Digital Services Act, Digital Transformation, Banking Supervision, Fintech, Governance, API, DLT, Artificial Intelligence, Third-Party Risk, Cyber Risk, ML TF Risk, Reporting, Regtech, EC, ECB

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