As the world population grows and becomes more and more technological, it generates exciting new trends in the development of financial integration policies that will be debated for many years. Over the past decade, more people have joined the formal financial sector than in any other period in banking history. More recently, in 2011, half of the world’s population was not provided with banking services. Financial accessibility is the building block for both poverty reduction and economic growth opportunities, and access to digital financial services is crucial for joining the new digital economy. New developments in the field of digital financial services are constantly taking place that help drive innovation and challenge regulatory authorities, raising important issues related to security, consumer protection, financial literacy and sustainability.
In many countries, regulators are creating new vehicles and licensing processes that have helped improve the feasibility of innovative models and accelerate the pace of affordability. These changes allow new operators, often in partnership with banks, to enter the space. From Bangladesh to Kenya and from Nigeria to Mexico, financial sector business models use digital solutions to meet customer needs and transform financial affordability.
We believe that there are several key financial inclusion policy trends for 2020:
- Digital unique identity solutions start to scale and achieve inclusion impact. New national identification programs have enabled the use of bio metric information to address regulatory issues that have historically been barriers to attracting new customers. The quality of digital identification systems is also crucial, in particular, consumer consent, data security, privacy and portability are needed.
- Mobile money is a technology that allows people to receive, store and spend money using a mobile device. With a combination of simplicity, convenience and security, mobile money is becoming an alternative to bank accounts and payments in several emerging and border markets. Mobile money is growing rapidly, and mobile money operators and conveniently located agents are replacing traditional bank branches.
- Big Tech companies today have a larger customer base and wider geographical reach than leading financial institutions, and thanks to their reliable customer behavior data, they can increasingly support customer-oriented products and experience and even become financial service providers themselves.
- Virtual assets, cryptocurrency, were again in the spotlight after the announcement in June 2019 of the upcoming launch of Facebook Libra and its promise of financial inclusion, which provoked a negative reaction from many quarters, including standard developers, national governments and regulators. However, use cases of virtual assets related to financial affordability began to appear in areas such as remittances and micropayments.
These models are needed to stimulate global inclusive growth.