“In the financial inclusion world, technology enabled financial services to the unbanked are revolutionary, but financial inclusion policymakers and regulators are not oblivious of the risks associated with increased digitization,” AFI’s Executive Director, Dr. Alfred Hannig said in his opening remarks at the 5th Annual Information Security Conference for Financial Sector in Doha, Qatar on 18 November 2018.
Organized by the Central Bank of Qatar, the conference gathered 1200 participants from security, finance and banking sectors to discuss cybersecurity threats and how to mitigate them. Topics ranged from FinTech, Blockchain, hackers and insider threats, to rising cyber resilience.
With cybersecurity is at the top agenda in the Alliance for Financial Inclusion (AFI), two major trends have been observed on the increase use of technology to deliver financial services (FinTech), Dr. Hanning explained.
In the supply-side, new entrants have emerged in the provision of financial services. These non-traditional players (non-bank providers) offer remittances, payments, micro-credits, micro-investments and other specialized financial services, including cryptocurrencies but are not fully subjected into the same prudential regulatory environment as the traditional financial service providers or banks.
In the demand-side, technology has enabled provision of financial services to reach at unprecedent rate wide segments of the population. Most of these consumers are not sophisticated in terms understanding the use of the technologies and the products offered, nor are able to keep abreast with the speed of technological changes
“AFI financial regulators and policymaking member-institutions from more than 90 countries call for action to mitigate cyber risks through policy interventions that need more holistic approach that ensures that the global financial sector and its direct contribution to financial inclusion is sustainable, resilient and robust,” Dr. Hannig highlighted.
These policy interventions include the need to enhance collaborative approaches to address global challenge of cyberattacks; capitalizing on systematic Peer-learning Platforms between financial regulators due to their effectiveness in addressing global financial risks; and considering demand-side perspectives in cybersecurity to build a sustainable financial inclusion ecosystem.
The Alliance’s endorsement of the Sochi Accord on FinTech for Financial Inclusion during 2018 AFI Global Policy Forum (GPF) is a hallmark of collaborative consensus between financial regulators and policymakers across diverse jurisdictions and stakeholders from international and domestic levels. The Accord recognizes that while technology is important to drive financial inclusion, the gains may be eroded if effective technological risk mitigation is not considered in the design and implementation of financial services.
Systematic Peer-learning Platforms between financial regulators is effective in addressing global financial risks, he explained adding that this ensures that regulators have a protected space, confidence and trust to explore working policy solutions that have been tested by peers. Working together through sharing of practical knowledge and working-solutions needs to be reinforced and expanded.
Regulators should consider demand-side perspectives in cybersecurity to build a sustainable financial inclusion ecosystem. Gaining lost trust is an uphill task after data breaches that affect reliable formal payment mechanism are left unchecked or lack appropriate regulatory intervention through effective consumer protection measures.
The future of the financial sector will continue to be shaped by technology and therefore invariably require regulators to keep abreast by implementing appropriate financial market infrastructure that can mitigate and respond swiftly in events of cyberattacks.
“Global collaboration is an imperative that we cannot ignore. Cross-regulator cooperation is gaining new heights of attention and we therefore need to harness this need,” Dr. Hanning concluded.