FinTech Policy Forum in Amman, Jordan – Opening Remarks from AFI Deputy Executive Director, Norbert Mumba

FinTech Policy Forum,
Organized by AFI in collaboration with Central Bank of Jordan (CBJ)
Monday, 2 April, 2018
Amman, Jordan

Opening Remarks by Norbert Mumba, Deputy Executive Director, AFI

Vice President of Regulatory Policy, Mr. Carlos Orta Tejada,

Governor of the Central Bank of Jordan, His Excellency Dr. Ziad Fariz,

Deputy Governor Central Bank of Jordan, His Excellency Dr. Maher K. Sheikh Hasan,

Development partners,

Senior government officials,

Heads of regulatory bodies and financial institutions,

Senior staff and staff from the Central Bank of Jordan and GIZ and AMF and AFI Senior Advisor for the Arab region Ms Sahar Tieby,

Distinguished ladies and gentlemen,

It is with great pleasure that I welcome you to the “Fintech Policy Forum” in Amman – a collaboration between Central Bank of Jordan (CBJ) and Alliance for Financial Inclusion (AFI). This event brings together Over 100 policy makers and regulators from Africa, Asia and Latin America and the Caribbean representing 50 countries and 49 institutions.

This year, we are honoured to be able to celebrate an important milestone. AFI is marking its 10th anniversary, a decade of bringing smart policies to life. As we are preparing for our 2018 Global Policy Forum held in Russia under the overarching theme “Innovation, Inclusion, Impact”, this Forum is a great place to begin the dialogue on FinTech for Financial Inclusion and start to exchange knowledge and practical solutions that have proven effective for financial inclusion of the underserved.

Ladies and Gentlemen – As I travelled from Kuala Lumpur to Amman, I reminded my younger colleagues that it is possible to check-in at the airport without having to check-in on Facebook. They seemed rather surprised at the revelation!

Indeed, we live in a hashtag generation. There is a constant urge to stay connected with pervasive access to digital technology.

• There are now more than 4 billion internet users around the world. A quarter of a billion users came online for the first time in 2017. Africa has seen the fastest growth rates.
• There are 5.135 billion mobile phone users across the globe with a total of 8.48 billion mobile phone connection.

This is transforming our personal relationships, the way we do business and fundamentals of finance and economics. In fact, new technology-based business models quash traditional economic thinking which extols that it is unprofitable to sell at less than cost. It is not uncommon to see customers availing services for free or even being paid – in the form of cash-backs, discounts, loyalty bonus – rather than charged.

With this context, let me now talk about the relevance of technology driven financial services or fintech to advance the cause of financial inclusion.

In the last 10 years, we have made huge strides in financial inclusion. Collectively, we have enabled 1.1 billion gain access to formal financial services. However –

• There are 2.1 billion people who still do not have access to formal financial services, out of which 1.1 billion are women;
• There are 1.1 billion people who lack a legal identity. Physically present, legally absent!

As a result, entry to formal financial services is restricted;

• There are 200 to 245 million MSMEs in developing countries with restricted or no access to finance – an estimated credit gap of $2.1 to $2.6 trillion;
• There are an unprecedented 65.6 million forcibly displaced people around the world, one of the highest levels of displacement the world has witnessed.

Clearly, ladies and gentlemen, there is a long way to go! And technology holds promise. Fintech is radically transforming the financial services industry. Innovations such as big data analytics, cloud computing, artificial intelligence, digital identity, blockchain are already disrupting financial services both at the front-end (such as product development, user experience and interface) and the back-end (such as interoperable payment infrastructure, alternative credit assessment models and digital identity platforms).

Fintech innovations can complement financial inclusion by:

• Broadening the access to financial services to the worlds unserved and underserved at a rapid scale.
• Deepening of financial services through enhancing usability of existing products and provision of additional (yet relevant) use cases.
• Improving the quality of financial services by including elements of privacy, transparency and consumer protection in the development or designing of products.

We have seen innovations in action across the globe.

China is home to more than 500 million mobile payment users. Companies such as Alibaba and Tencent have demonstrated par excellence that payments are a conduit to financial inclusion. For example – anchoring on its payment platform (Alipay), Alibaba’s Ant financial offers wealth management, insurance and credit products to individuals and MSMEs. It is hardly surprising that with USD 100 billion valuation, Ant Financial is valued more than incumbents such as Goldman Sachs and Morgan Stanley.

In India, the digital identity programme (Aadhaar) has paved the way for financial inclusion. With more than 1.2 billion Indians enrolled, Aadhaar platform facilitates eKYC, authentication of financial transactions, payment of government subsidies and cash transfers. To give you a measure of scale, close to 300 million eKYC transactions were carried out in the month of March 2018 alone.

In Kenya, Ghana, Zambia and other parts of Africa value added financial services such as savings, credit, cross border remittances, micro-insurance and even government bonds are riding on the rails of mobile money. 66% of the combined adult population of Kenya, Rwanda, Tanzania and Uganda use mobile money on an active basis.

In Jordan, it is heartening to seeing the inspirational work of Central Bank of Jordan in leveraging FinTech for financial inclusion for vulnerable groups such as women, youth and forcibly displaced persons. I am sure you will learn more about JoMoPay, eFawateer, regulatory sandbox and other initiatives undertaken by CBJ during the forum and ensuing working group meetings. Thanks to visionary leadership of HE Governor Dr. Ziad Fariz, Jordan has become a FinTech leader in the region.

Distinguished guests and participants – while appreciating the role of FinTech for financial inclusion, let us also remind ourselves that technology is a double-edged sword. Technology and data driven financial services pose cyber-security, data privacy and consumer protection related risks. Here are my suggestions to FinTech companies and fellow regulators to leverage the best of what FinTech can offer towards financial inclusion:

FinTech companies:

Move Beyond Credit: Friends, allow me to recollect humble genesis of the microfinance revolution. It started on the bedrock of savings. Poorest of the poor collected savings – however little – which in turn were used for credit intermediation. However, as the sector evolved, credit became the sole focus – often leading to over-indebtedness, unfair lending practises and other consumer protection issues. It is important to draw learnings from microfinance evolution as fintech innovations for inclusion unfold. Poor and the unserved segments have a bouquet of financial services needs beyond just credit. So, while expanding credit is important – so is reducing cost of remittances, creating efficiency in payments, facilitating safe saving avenues and decluttering insurance services.

Value Added Services: It is a myth that simply providing access to financial services to poor and unserved will lift them out of poverty. Access to savings, credit and other products will certainly help them be resilient to financial shocks. However, in the interest of financial wellbeing and sustainable income generation they need skills to produce, market, sell goods and services including financial management. Fintech companies are well positioned to leverage their platforms to complement financial services with these value-added services.

Privacy and Transparency by Design: Drawing parallels from what Peter Drucker said, we seem to be living in the age where convenience eats data for breakfast, lunch and dinner. While convenience is important, it should not be at the cost of rampant abuse of customer’s personal and financial data. It is expected that data driven financial services integrate elements of privacy, security and transparency while developing products and business processes.

Regulators:
Build Capacity: Well dear friends, it is opportune time to think and reflect. While we prophesise about technology and innovations, how many of us think that we have the right organisational culture and capacity that nurtures innovation? In this endeavour, AFI has lined up a slew of activities in the coming months ranging training and joint learning programmes. We will facilitate peer learning activities to share best practises for balancing financial innovations with oversight. I am also happy to let you know that the upcoming 2018 AFI Global Policy Forum in Russia is under the theme “Innovation, Inclusion and Impact”. Further, the occasion is also befitting to talk about the recently launched Financial Inclusion in the Arab Region Initiative (FIARI) to help accelerate conducive policies and actions for enhancing Arab societies’ access to financial services through an effective coordination mechanism, peer-learning and capacity building initiatives.

I urge my fellow regulators to commit to inculcating innovation within and beyond as we carry out our primary mandate of stability, integrity and consumer protection.

Enhance Cybersecurity Frameworks: Isn’t it startling to know that our handy smartphones have more than a billion transistors in them? Indeed, Fintech has profoundly benefited from the Moore’s law. But, I call your attention to an MIT paper which says that a corollary of Murphy’s law is also applicable to fintech. The paper aptly puts “whatever can go wrong will go wrong faster and bigger when computers are involved”. Without sounding alarmist, let me just say that we need to urgently work towards frameworks that prevent, manage and mitigate cyber threats.

Partnership and Cooperation: Essential nature of fintech is that it is borderless. However, as regulators our mandate is limited to our respective jurisdictions. As our ED Mr. Alfred Hannig rightly suggests “it is important to enhance Public Private Dialogue (PPD) and global dialogue with the private sector, technology companies, researchers, development partners, and regulators from developed and developing economies to enhance the mutual understanding of the FinTech innovations’ risk profiles, their role in financial inclusion and contribution to solutions to enhance compliance to International Standards”.

Allow me to end with a call for action to my fellow regulators, fintech companies and other stakeholders in the eco-system to leverage innovations in a responsible and safe manner to reach out to vulnerable sections of the society such as poor, women and forcibly displaced persons. Our sincere thanks to HE Dr. Ziad Fariz and his excellent team at the Central Bank of Jordan for bringing us together and extending a warm welcome. I wish you all the best for the today’s proceedings at the fintech forum and for the working group meetings in the coming days.

Thank you!