Digital finance is easiest to notice when it breaks down. A payment does not arrive. A transfer is blocked. A card works in one country and refuses to work in another. A warning appears on screen, but it's too late.
Most of the time, none of this is visible. A card is tapped, a salary lands in an account, and a transfer clears. The transaction disappears into routine. For decades, that disappearance was seen as a sign of maturity. What works smoothly is rarely examined. Behind every payment lies a complex combination of infrastructure, rules, and standards that users never see. That is the machine.
The European approach to digital finance differs from that of other major economies. It is neither market-led nor centrally governed. Europe has used regulation to shape the market's operating conditions. European regulators have specified key activities, including interoperability, liability, customer authentication, payment access, data sharing, identity, and more. They are designed in advance in directives, regulations, technical standards, scheme rules, and supervisory guidance. I would venture to say that Europe treats regulation as architecture.
There are real advantages to that approach because it can support cross-border use, reduce inconsistencies, and enable systemic stability. On the other hand, costs are very high. Complexity becomes hard to manage, and compliance burdens fall unevenly across the market. Large institutions and specialist providers are better prepared to implement complex rulebooks and translate regulatory requirements into IT systems. The legislative process is lengthy. Directives and regulations are then complemented by delegated acts, technical standards, scheme rules, and supervisory interpretation.
When such a complex package becomes binding, the market environment and the technological context may have changed.
The machine, as I see it, has four layers:
- infrastructure: payment rails, clearing and settlement systems, cloud services, secure hardware, mobile devices, and the networks that move money and data.
- Rules and liability: the legal and scheme-based arrangements that define participation and assign responsibility when things go wrong.
- Identity and trust: authentication, verified attributes, authority, and the means by which the system determines who may act.
- Interface: apps, wallets, warnings, defaults, error messages, and every point where users actually meet the system.
These layers are intertwined. Payments generate data, identity shapes liability, and interfaces hide much of that complexity and influence users’ behaviour at the moment of action.
But digital finance should also be seen as an important part of European resilience and sovereignty. The debate over the digital euro highlights concerns in this regard. It is a discussion about whether public money should continue to have a meaningful place in an increasingly digital system, and on what terms. European digital payments depend on a narrow set of external infrastructures, schemes, platforms, and technology providers. Under normal conditions, this dependency may seem manageable, but under stress, it becomes a clear risk. And cash remains the only public, offline-capable payment instrument independent of third-party digital infrastructure.
One question I often ask myself is whether digital finance should keep treating speed and convenience as the main drivers of progress. Faster payments, continuous access, and low effort at the point of use are widely presented as self-evident improvements. In many circumstances, they are. But they also shift where risk sits and who carries it. Removing the delay from a payment system leaves less time to detect fraud. Removing friction from an interface often shifts the burden of correction downstream, where remedies are slower and more expensive. Good friction could be the answer here. Just a brief moment for additional reflection or verification, before the final approval of a payment or before access to financial data is granted.
Regulation faces a similar problem. Strong customer authentication (a good example of good friction) can reduce some forms of fraud, but it also makes access harder for less digitally capable users. Anti-money-laundering controls can protect the system but raise barriers to inclusion.
For most people and institutions, participation in the financial system is not optional. Exit carries a high social and economic cost. The system can be modified, but only through trade-offs.
For a long time, the invisibility of financial infrastructure was treated as evidence that the arrangement was working. Today, that same invisibility is a source of risk. The components of the system are complex in their own right. Identity is now dependent on a sophisticated infrastructure, both technical and regulatory. Our daily financial habits can be tracked and analysed by different tools. Apps and interfaces, through default settings, influence our behaviour more directly than regulations. And the infrastructure is managed by platforms, usually based outside Europe.
These components have rarely been considered strategic governance tools. I believe they should be.