Advances in digital transformation are changing the framework conditions for the financial market, and are accompanied by new questions in relation to interpretation and risks for market participants while also posing new challenges for the Financial Market Authority’s supervisory practices. In 2024, the Austrian Financial Market Authority (FMA) continued its analysis on digitalisation in the Austrian financial market. This edition’s objective was to identify the digital risk profile of companies in the Austrian financial market as well as ICT interdependencies. The Austrian Digital Finance Landscape is the follow-up to the previous editions of the study conducted in 2018 and 2021. Supervised entities were surveyed about various issues, including:
- the digital technologies they are using,
- the role of digital distribution platforms and comparison portals,
- the ecosystems and ICT interdependencies that exist in the Austrian financial market,
- whether existing ICT infrastructure is able to keep up with the increasing level of digitalisation, and
- how well the industry is prepared for digital operational resilience requirements under the EU’s new legal framework.
“The findings from this analysis serves as input for the FMA’s supervisory strategy, and has already been taken into account in setting the priorities for 2025,” emphasised the FMA’s Executive Directors, Helmut Ettl and Eduard Müller. “It helps us to take into account trends that exist regarding the use of innovative technologies in supervision, to identify concentration risks and potential channels of contagion, to monitor the cyber-resilience of the Austrian financial market in a targeted manner, and to reflect on the digital risk profile of the supervised entities.”
Findings from the analysis
Cloud services have grown strongly in significance since 2018 and are used almost universally by entities in all financial market sectors. The usage of Robotic Process Automation has also grown significantly, and is already being used by two thirds of banks and half of all insurance undertakings for processing repetitive forms and in transferring records into the analysis systems. In contrast, Blockchain technology is still only used very infrequently. Contrary to some planned expansions in 2021, in some case usage has even fallen due to a lack of specific use cases.
AI-based systems are strong growth areas. The plans communicated in 2021 about expanded use were met across the board. More than one quarter of supervised entities are already using Machine Learning in their operative business activities, such as for rating systems and for combating fraud. This area, as well as that of Natural Language Processing, will also be expanded considerably in the coming years.
Digital distribution platforms, comparison portals, social media, chat bots and robo advice are increasingly replacing traditional sales channels. Comparison portals have established themselves in almost all sectors as a pre-sales instrument since 2018. To date, however, contracts have not been concluded directly through such platforms, although this is likely to change in the coming years. New issues arise under supervisory law in this regard.
Almost ⅔ of major ICT-related incidents arise from third-party providers. This demonstrates the necessity of the DORA requirements for ICT third-party risk management. More than ¾ of major ICT-related incidents in the Austrian financial market can be traced back to system errors such as software errors or network infrastructure failures – and not to external attacks.
Room for improvement
The FMA’s DORA gap analysis shows that on aggregate the Austrian financial market has already taken the most important measures to ensure DORA compliance, even if individuals entity are at vastly different stages of compliance. ICT third-party risk management has the largest outstanding need to act. Amendments to contracts as well as the establishing of a register of information of ICT service providers covering all contractual agreements about the usage of ICT services are currently still underway across all sectors, and are one the largest challenges presented by DORA.
Call for inputs
“Our Digital Financial Landscape is also the basis for further discussion about digital transformation in the Austrian financial market. We actively invite interested parties to comment and submit their opinions,” remarked the FMA’s Executive Board. The interested public is therefore invited to submit its comments and remarks to the FMA about the Austrian Digital Finance Landscape until 31 March 2025; by e-mail to [email protected].
Link to the FMA Digital Financial Landscape study: Digitalisation of the Austrian Financial Market
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