Digitalisation Study 2021

Digitalisation in the Financial Sector: Progress, Interconnectedness and IT Security

Digital transformation is advancing at break-neck speed in the Austrian financial market. Almost all undertakings have integrated digitalisation into their strategy, with almost half (44%) of them – twice as many as in 2018 – having allocated measurable objectives and budget to their digitalisation strategy. The need for external support in the field of Information and Communication Technology (ICT) is increasing, the degree of interconnectedness with external service providers is increasing throughout the entire financial sector, with IT risks increasingly also being outsourced to the interface to third parties. At the same time, the quality of their in-house IT security measures has improved significantly, especially in relation to cyber– and cloud security.

Digital solutions used across all business areas

In recent years the use of cloud services has intensified particularly strongly, which are already used by around three quarters of all supervised entities. As recently as 2018, only 60% of market participants were able to imagine using them within a foreseeable period of time. The usage of Robotic Process Automation has increased significantly and is already particularly widely used in banks, where it is already used by around 60%. On the other hand, insurance companies are the pioneers in machine learning, used by almost 40% of undertakings, followed by banks with around 30%. Automated data interfaces that promote digital cooperation are already used by around two-thirds of banks and insurers; and such technology is being more frequently used in other sectors.

In total Austria’s financial services providers are currently using more than 3,000 critical IT application to aside their critical business processes. The trend is towards consolidated standardised software that can be deployed for as long a time as possible thanks to updates. As a result, the diversity of providers may fall in the long-term and a concentration may emerge with only a few large software developers.

Cautious migration of products and services

A lot of products and services are being adapted step-by-step towards new digital possibilities. The priority remains in migrating traditional products and services to new technologies. In contrast, developing new and creative digitally native solutions is only of secondary importance. Digitalisation in sales and customer contact is advancing very rapidly, with increasingly digital channels like social media, chats or video-based communication being used, especially in the pre-sales field. Conventional sales channels are increasingly losing their importance due to the use of digital distribution platforms, comparison portals and robo advice.

Despite the increasing proliferation of crypto-assets, licensed financial services provider are currently barely investing in this segment. This applies for both their own assets, as well as for customer deposits. To date, Blockchain technology has been unable to establish itself as a basis for new products or services of licensed providers due to outstanding regulatory issues. The planned regulatory “Digital Finance Package” is expected to provide fresh impulses.

Implications for the FMA’s supervisory activities

The findings of this edition of the study have been fed into the FMA’s strategy for supervision and were already taken into account when determining the priorities for supervision in 2022. It has helped the FMA to identify concentration risks and potential channels of contagion, to intensify the monitoring of cyber-risks, to determine and analyse trends and drivers in digitalisation, as well as creating conditions for competition that are as fair as possible between analogue and digital providers and products.

Digitalisation in the Austrian Financial Market - 2021 (Format: pdf, Size: 3,8 MB, Language: English) Digitalisation in the Austrian Financial Market - Call for Input: Findings 2022 (Format: pdf, Size: 366,5 KB, Language: English)