and data analytics in helping us measure and manage the risks – both old and new – to financial stability. 2. outlook for the future : digitalization fundamental shift in consumer expectations let us start with consumer expectations. how are they shaping financial services? 1 / 5 bis central bankers'speeches customers, especially, expect that services are available when they are needed. they are used to 24 / 7 world. the immediacy of services is the new normal. as to the user experience provided by a bank, consumers no longer necessarily use other banks as a benchmark. user experiences provided by tech companies in other services also shape expectations in banking services. these shifts pose a challenge to traditional banks ’ infrastructure and organizational setup, perhaps even their mindset. in contrast, the opportunities opened up by digitalization has spawned fintech start - ups that strive to be customer oriented, providing immediacy of services, and being available 24 / 7 by design. many banks try to meet this challenge, not without difficulty. fragmentation in payment services payments are an area where the new products and players are already quite visible. if a decade ago we had the choice of whether to pay with credit card or cash, now we also have mobile apps for making payments, and in some rare cases even virtual currencies. similarly for a merchant, the choice, what payment methods to accept has become more complex. at least in the short run this fragmentation of payment choices will likely continue. another phenomenon is that payment becomes embedded into other services. this emphasizes the need for sufficient financial literacy as it may become more difficult for customers to keep track of their spending. this is coupled with the fact that instant consumer credit decisions can be incorporated into these services. regulators need to stay alert at least from two perspectives : first, to ensure sufficient consumer protection, and second, to monitor the development of consumer credit aggregates from the viewpoint of financial stability. it is worth noting that most of the new applications are still based on the existing infrastructure. this may impose restrictions on what can be achieved in terms of innovation. it also stresses the importance of thinking about the current systems in the background. new business models fintechs typically challenge the most profitable parts of banking business by offering targeted services and using lean organizations. competition may hence lead to lower margins in banks. in the short run, this may put a strain on profits in some incumbent institutions, given their heavier organizational structures. in the longer run, the entry of fintechs could induce a

erkki liikanen : on the digitalization of financial services – opportunities and risks speech by mr erkki liikanen, governor of the bank of finland, at the 2017 risklab / bof / esrb conference on systemic risk analytics, helsinki, 28 - 30 june 2017. * * * 1. introduction advances in information and communication technologies have shaped the development of financial services already for several decades. digitalization of financial services is a new name for this development. but undoubtedly the new name also reflects significant turns in recent developments, which have opened entirely new avenues. a central phenomenon is that digitalization of information has recently been spreading to almost all areas of human activity. one result of that is the availability of ‘ big data ’, to use the well - known catchword. it is possible to combine information between sectors and activities more efficiently, often in surprising and productive ways. this is having an impact on all areas of economic activity from production and working patterns to leisure. at the same time, techniques to handle and analyze the vast new data resources are in increasing demand. prospects for technological applications which were once considered utopian, are coming a real possibility. all this has opened new opportunities also to financial services. both the incumbent institutions and new players are seizing these opportunities. great benefits are available, but not without risks. ideally, new technologies and players can increase competition which may lead to better and cheaper financial services to the end users : households, companies, and the public sector. today i want to share with you some thoughts regarding digitalization and financial services. i want rather raise questions and leave the search for answers to you, researchers. given that this is a conference on systemic risk analysis, i will discuss risks that might be gathering strength as digitalization continues. but i will start by discussing the benefits available, which will help us understand the drivers of new developments in financial services. second, i will discuss the role of regulation. important regulation has already been launched to help reap the benefits made available by digitalization. new legislation needs to be technologyneutral. to safeguard the benefits, regulation also needs to keep pace with the potential new risks. but therein lies a challenge : the speed of development has become so fast that it may easily exceed the speed with which regulation can adapt. so this is a new paradigm also for the legislators. finally, and what might come closest to the concrete issues dealt with in this conference, i will consider the potential role of new data