The Digital Finance Strategy is a set of measures designed to further support and enable the future of digital finance, in terms of competition and innovation while mitigating the inherent risks associated with it. With the development of the digital world, the world has become quite a volatile place. One can never really tell if another country will be able to reach a particular objective or not, and therefore the need for a flexible digital finance strategy that can adapt to different environments has increased. This has led to the development of Digital finance services that are designed to help companies ensure that their digital activities are as flexible as possible in order to meet any new and unforeseen challenges that might arise.
The Digital finance strategy has five key elements which are designed to help member states across the EU facilitate digital transformation as much as possible. First of all, there is the European Financial Stability Fund (EFS). The EFS acts as an important bridge between EFS-backed policy instruments such as the euro area refinancing and the creation of the European Stability Mechanism (ESM). The EFS will pool the risk borne by the ESM into a single European fund so that all of the debt and other financial risks are transferred to a single body. This is an important step towards transforming the way that cross-border risks are managed within the single market.
Secondly, there is the European payment system, the Single European Payment System (Seping) that was designed to allow for electronic payments across borders. The introduction of this payment system was accompanied by the introduction of the European Payments Act that amends the principles contained in the Treaties. The purpose of this act is to introduce more efficient and cost-effective cross-border payment systems by amending the Treaties so as to harmonize the legal aspects of the system.
The third element of the Digital finance strategy is innovation. The implementation of new measures and reforms will depend on the prioritization and the decision making procedures set out in the Digital Finance Strategy. In the long term, it will be possible for a number of innovative solutions to emerge that can replace current procedures and deliver better value. Therefore, it is necessary to address these issues before they hamper investment growth. For this to happen, a commitment has to be made by the national authorities at every level to maintain or introduce policies and reforms that are consistent with the Digital Economy Act and the Payment System Act. There is also a requirement to address the social and economic implications of these reforms and ensure that these do not have adverse effects on the country’s development and prosperity.
The last element of the Digital finance strategy is implementation. This is probably the most important element because it will determine whether the digital transformation can materialize. There is no going back once the transformation takes place. The key is to make sure that all elements of the digital transformation are well understood and implemented. The execution must be based on good planning and sound implementation strategies.
The lack of a coordinated approach at the national level makes it hard to know what measures will yield the desired results. It is therefore important for governments at all levels to develop intergovernmental institutions that can help solve the innovation risk and foster the necessary reforms needed. The risks are real and should not be ignored. Governments should therefore work closely together to develop appropriate policies and reforms that can mitigate the risks associated with implementing the digital finance package. However, it is also important for governments to realize that innovation risk cannot be completely eliminated and thus any measures that reduce innovation risk will be welcome innovation.