The evolution of technology and its uses in business processes impact all steps of the value chain in the financial sector, including the emergence of start-ups, often in cooperation agreements with incumbent undertakings, technology firms, BigTech companies, and IT – platform providers entering the insurance market.
Digitalisation also leads to the emergence and consolidation of new distribution channels (e.g., online platforms), new ways of engaging with customers that are of potential significance for them (e.g., adopting artificial intelligence tools to interact and evaluate customers), new kinds of competitors and potential disruptors of traditional business models (e.g., Mixed Activity Groups (MAGs) performing financial and other services, etc.). The overall impact on the competitiveness and distribution dynamics of the market due to digitalisation is expected to continue to increase.
To reflect on the ongoing changes, supervisors need to understand new technology-led business models/strategies better, what risks they involve, and whether such business models/strategies will be sustainable in the longer term.
Assessing business models gives National Competent Authorities the opportunity to better understand the opportunities and vulnerabilities in an undertaking’s business and, therefore, develop a more idiosyncratic and appropriate supervisory plan that is adapted to the reality of new digital business models. This includes, but is not limited to fragmentation of the value-chain, open finance initiatives or use of data and artificial intelligence, as well as supervision of the increased risks (e.g. profitability
and funding risks, climate and cyber security risk) and their correlation for those entities which is crucial from a supervisory convergence perspective. As such, the conclusions reached through the Business Model Analysis will be a useful input to the risk assessment and supervisory plans.
EIOPA is currently reviewing its Chapter of the Supervisory Handbook on Business Model Analysis to support supervisors in this task – contributions within the workshop will be taken into consideration in its review.
The EU Supervisory Digital Finance Academy Digital Business Model Analysis (BMA) workshop is an opportunity for participants to learn from each other and gather insights from financial institutions, other regulators, and supervisors about the analysis and supervision of digital business models.