Financial sector faces innovative and socially significant changes
The Financial sector development plan for the next three years is an important financial sector policy document aiming to set the main development priorities for the sector. In addition, priority directions for development are extensively supported by a plan of activities defining goals, institutions in charge and timelines for completion.
One of the most important features of the new plan is that, contrary to the past version of the plan, compliance, AML and CTF have been explicitly excluded and will become a part of a dedicated policy document. Thus, for the new version of the plan, the main focus is on the financial sector development and it is much more stronger than before, since there is no need to seek a balance between compliance and development within the same policy act.
The plan for 2021–2023 is composed of three pillars which allow to precisely group barriers for development and global trends and they are as follows: Availability of funding and investment opportunities; Digitalisation and availability of innovative services; and Sustainable finance.
In view of the fact that the Covid-19 pandemic has accelerated digitalisation globally and competition between countries in innovation, I would like to point out that essentially digitalisation and innovation are the most promising directions where to leverage the current potential of the Latvian financial sector. The strength of our financial sector is that it is technologically advanced, whereas its relatively small size, in turn, allows to be quick and provides more flexibility in deployment, experimentation and introduction of innovative solutions. Intensification of innovation, including financial innovation, is expected to remain one of the strongest development trends in the post pandemic world. Therefore, determined and ambitious strategy would allow us to be leaders in the race of innovation and benefit from frontrunning.
FinTech is already a sustained trend in the financial industry. In recent years, we have concentrated our efforts on the issues and challenges related to the need to tidy up and reconstruct the financial sector. As a result, we indeed were not able to keep up and lost the ground in financial technology. This is neither relevant for the broader perspective anymore, nor for the Nordic Baltic region where we are obviously not in a position to declare leadership.
Therefore, we are very pleased to welcome such an ambitious approach proposed in the plan, which was jointly prepared by Latvijas Banka, the Financial and Capital Market Commission and Ministry of Finance. The aim of the proposed strategy is as follows: in three years, in close cooperation of the responsible authorities and the financial sector, to regain leadership confidence and lay a foundation for further ambitious development of the Latvian innovation ecosystems as one of the most innovative and efficient in the world.
The financial Infrastructure, i.e. the rails used for the financial flows, plays a crucial role in building the innovation ecosystem. Latvijas Banka, in collaboration with the Latvian banking community, has developed and introduced an innovative payments infrastructure – instant payments, currently additionally supported by instant proxy links. I would also like to stress that our infrastructure is also used outside Latvia, by banks in Estonia and Lithuania. We are among the leaders in terms of payment innovations and we are strongly committed to proceed with further developments in the payments field. Our main priority for the next year is introduction of instant payment requests, known as request-to-pay (RTP) functionality, still further improving interbank payments and delivering new opportunities for financial services and enterprises.
As regards the infrastructure, the Financial sector development plan aims to strengthen our previous positive experience of partnership with the financial sector, draws up the roadmap for further development and adoption of instant payments in the next three years and facilitates availability of instant payments in the public sector. In addition, considering the changing payment behaviour of the general public, we anticipate integration of instant payments with the national e-invoicing and e-receipt storage solutions in the upcoming future.
In order to mitigate the risks related to the insufficient level of literacy in the rapidly growing world of financial technology, we intend to significantly strengthen the focus on educating the general public in the field of financial technology, its potential to benefit users, as well as threats it may bring. Our joint aim is to provide convenient, safe and efficient financial services to everybody in Latvia. I expect that the digital world will offer an even broader list of different personalised solutions, at the same time lacking interoperability with each other. Therefore, our duty is to guide users on how to choose appropriate and trusted solutions and use them safely.