Welfare implications of digital financial innovation

Based on remarks by Mr Luiz Awazu Pereira da Silva, Deputy General Manager of the BIS, with Jon Frost and Leonardo Gambacorta at the Santander International Banking Conference on "Banking on trust: Building confidence in the future", Madrid, 5 November 2019.

The welfare implications of digital financial innovation are not yet very well understood. Drawing on existing evidence, this contribution surveys the main mechanisms through which digital innovations in payments, credit, savings and insurance could impact on welfare. In each of these areas, there may be important efficiency gains from digital technology applications, but we do not know how these gains will be shared. More generally, distributional effects may arise from changes in competition and market power, price discrimination and the "tech premium" in labour markets. Maximising the welfare benefits of these innovations for the whole of society will require cooperation between public authorities, a long-term view from the private sector, and societal decisions from governments.