What changes for users

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Digital Finance Strategy, European Data Strategy and Digital Compass – the European Commission has presented one strategy paper after the other over the past few months. What exactly is it?

The common goal of all strategy papers: to strengthen Europe as a location for financial technology, to promote digital and data-driven innovations on the corporate side and, above all, to give users more data sovereignty and enable them to find new digital financial solutions. Two points from the Digital Finance Strategy are particularly exciting for the user: the creation of uniform digital identities and the promotion of the exchange of financial data.

Here in Germany there has not yet been a really satisfactory solution for digitally identifying yourself to business partners. Since 2017, an E-ID chip has been integrated into all new ID cards in credit card format, with which users can theoretically identify themselves online. In fact, the use of the online ID function is limited to the desktop and an extra card reader is required. So it’s no wonder that the solution is rarely used in practice. The federal government now wants to make handling more user-friendly and develop a virtual version of the ID card that can be saved on smartphones. The E-ID app is planned to be available from June. The question is how quickly this solution will actually arrive in our everyday lives.

Other EU countries are much further ahead than we are. Estonia is a pioneer, where digital identities are already firmly anchored in everyday life and are used by users to cast their votes online in elections, pay taxes online or view their medical files online.

Instead of many individual country solutions, the European Commission now wants to make a proposal to introduce uniform digital identities so that EU citizens can identify themselves more easily and quickly across borders in the future. Declared goal: 80 percent of citizens in the EU should use their digital ID by 2030.

It remains to be seen what will catch on faster with users – the federal government’s e-ID app or the EU alternative. The idea of ​​being able to do a lot of things digitally in the near future that previously required going to the authorities or cumbersome video identification – such as opening a bank account or registering a car – sounds very appealing to many. And if that is also possible across national borders, for example because I am doing my job in Barcelona from my home in Berlin because of Corona, but have to deal with a lot of bureaucracy in Spain, then the whole thing will be really exciting.

Also interesting: What can the ID card do on the smartphone?

With the entry into force of the EU directive PSD2 at the end of the 2010s, the user gained significantly more sovereignty over his personal financial data: Since then, the banks’ monopoly on account data has been lifted and the user can decide who to make his account data available to and who not. He now has the option of making his data accessible to banks, insurance companies and other service providers via open interfaces in order to receive benefits such as discounts or additional services in return. For example, the user can automatically incorporate information from online banking into the digital tax return and thus save valuable time.

With the so-called open finance approach, the EU is pursuing three main goals:

• The user should have better access to his data and control over his personal data.
• Companies in the EU financial sector should be given access to more customer and business data so that they can offer personalized services and respond to customer needs.
• Companies and individuals should be given the opportunity to compare products and find more cost-effective options.
  Germans are still rather reluctant to use personal financial data. But the proportion of those who absolutely cannot imagine sharing their account data is decreasing – according to the result of a published last autumn Study by PwC Strategy. One in five Germans (20 percent) is already prepared to allow insights into their account postings if they receive discounts, additional services or the like in return. According to Study by the market research institute Today and Tomorrow Willingness is highest among insurance companies where the respondents are already customers (23 percent).

The EU’s digital strategy has set the ambitious goal of three quarters of all companies in the EU using digital technologies such as cloud computing, big data and AI by 2030. But it is precisely the insurers, who enjoy a relatively high level of trust, that are lagging behind when it comes to data. Many collect data, but hardly ever evaluate it. According to the Federal Ministry of Economics Today only 16 percent of German insurers use big data, just eight percent work with artificial intelligence. Structures and processes that have grown over decades often make it difficult for established companies to allow innovative changes. In addition, many large companies have outdated and highly complex IT systems. Building data interfaces for new digital products into these legacy systems is tedious. Difficult, but not impossible.

Sebastian Langrehr

Sebastian Langrehr is CSO at Friendsurance and responsible for Market Strategy & Sales. Among other things, he is the organizer of the Digital Bancassurance Group and co-founder of Free Insurance Data Initiative.

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