Finding our way with FinTech for Financial Inclusion

“Policymakers need to be sober when it comes to regulations and devise appropriate enabling regulatory environments that include effective risk mitigation,” Ms. Olga Skorobogatova, First Deputy Governor of Bank of Russia emphasized during a plenary session on FinTech for Financial Inclusion from the first day of the 2018 AFI Global Policy Forum, where panelists provided guidance for regulators on these questions, identifying a range of actions regulators can take to facilitate FinTech for financial inclusion.

Disruptive innovations like artificial intelligence, machine learning, blockchain technology, biometric identification, cloud computing, and the use of big data are revolutionizing how financial information is being collected and processed, and making it easier, more affordable and convenient for consumers to access tailored financial products and services.

There is a strong appetite from AFI members to understand the nature and potential of these FinTech innovations and how they can be leveraged to dramatically scale up financial access and usage. There is an equal appetite to understand, anticipate and manage the new risks of these technologies to cybersecurity, use of data and consumer protection.

Regulators were encouraged to develop roadmaps to ensure that regulatory reforms support both the technology and consumers. Effective risk mitigation measures should be implemented to address the new challenges of FinTech and build resilience around new technologies, while also empowering consumers to provide consent on the use of their personal data. Regulatory sandboxes are a useful tool for testing ideas before introducing changes to regulations, but peer learning is key, and countries need to draw on the policy lessons of experienced peers or advanced economies to implement effective sandboxes.

Panelists also pointed to the importance of devising and promoting programs that facilitate Person-to-Business payments, in order to make e-commerce ubiquitous and reduce reliance on cash. Policies should support expanded use of technology in different layers of the supply and distribution chain to help lower the costs of payments and ultimately boost user uptake.

“It is important to form strategic alliances with a wide range of financial service providers, banks, non- banks and FinTech to drive FinTech for financial inclusion in a country,” Deputy Governor Elsie Addo Awadzi from Bank of Ghana noted.

The Sochi Accord on FinTech for Financial Inclusion, endorsed a day earlier by AFI membership during the Annual General Meeting, aims to assist AFI members in ensuring that FinTech for financial inclusion is truly transformative. AFI is concentrating on gathering experiences with technological innovations that hold promise to include the unbanked, close the gender gap of financial inclusion, help us manage climate change risks, mitigate the challenges of de-risking, and bring down the costs of cross-border remittances.

A recent AFI report provides additional guidance in this emerging area and elaborates the four key pillars of FinTech for financial inclusion in more detail. AFI members are encouraged to review it: FinTech for Financial Inclusion: A Framework for Digital Financial Transformation.