Fintech and the Future of Finance: Market and Policy Implications

Thank you for the question. Absolutely, there is a connection. Mobile banking, which refers to accessing bank accounts using mobile apps and other mobile-phone-based services like text messages, has become common place all around the world, making it easier for people to manage their savings and make payments without stepping foot into a bank branch.

And mobile money is already transforming people’s lives. in less than 15 years, over 1.3 billion registered mobile money accounts were created, with Sub-Saharan Africa leading the way.

A study in Kenya found that women’s access to mobile money services delivered big benefits:
- It enabled women-headed households to increase savings by more 20 percent.
- It allowed 185,000 women to leave farming and develop business or retail activities.
- It helped reduce extreme poverty among women-headed households by 22 percent.

Expert: Erik Feyen
 

Please see the document at documents.worldbank.org...

Expert: Harish Natarajan
 

Given rapid developments, it is key for traditional financial firms as well as new entrants to maintain up to date in the safe adoption of digital technologies. Technological advances are blurring the boundaries of both financial firms and the financial sector. New infrastructures, providers, products, business models, and market structures are shaping market outcomes in profound ways.

The two fundamental drivers of this wave of fintech are i) ubiquitous connectivity through mobile, internet-connected devices and communication networks, and ii) low-cost computing and data storage. Together these enable new business models for the delivery of technology, such as cloud computing.

The resulting reduced transaction costs and friction-free information flows allow for a reconfiguration of financial services value chains and product bundles. And the ability of customers and providers to access information and move funds more easily promotes the unbundling of financial services, from credit and insurance underwriting to investment robo-advisors.

Expert: Erik Feyen
 

Thank you for the question. With the rapid and ubiquitous increase in digitalization, cyber crime is indeed a growing concern.

In the financial services sector, risks of money laundering and other forms of illicit finance loom large.

The Financial Action Task Force (FATF) sets international standards to ensure national authorities can effectively go after illicit funds linked to cyber fraud and other serious crimes. For more information, please visit www.fatf-gafi.org/...

The World Bank helps countries build capacity to pursue the ‘dirty money’ that flows through the global financial system and is a strong voice for developing countries in global forums such as the FATF.

Expert: Erik Feyen
 

Yes, please see some references here  pubdocs.worldbank.org/...

Expert: Harish Natarajan
 

Yes! Since 2011, the Global Findex Database has been the definitive source of data on global access to financial services from payments to savings and borrowing. The 2021 edition, based on nationally representative surveys of about 128,000 adults in 123 economies during the COVID-19 pandemic, contains updated indicators on access to and use of formal and informal financial services and digital payments, and offers insights into the behaviors that enable financial resilience. The data also identify gaps in access to and usage of financial services by women and poor adults. Please see  www.worldbank.org/...

Expert: Harish Natarajan
 

Thank you for the question.

We conducted a survey under financial institutions all over the world to better understand how they think about digital transformation.

Key strategic priorities for financial firms included digitization of customer acquisition and account opening, creating new digital products, and transforming internal processes. More than 80 percent of respondents felt that the COVID-19 pandemic increased the need for fintech and digital transformation and made digitization in customer channels, product adaptation, and internal processes a strategic priority.

Respondents were concerned about operational and cyber risks increasing as a result of fintech and digital transformation. They felt that the regulatory framework and guidance for fintech and digital transformation innovation could be improved, particularly with respect to remote onboarding and account opening, use of agents or third-party channels, and automation of new products.

For the technical note, please visit:
documents.worldbank.org/...

Expert: Erik Feyen
 

Thank you for the question.

The World Bank Group and the IMF launched the Bali Fintech Agenda in 2018, recognizing the need for regulators and policy makers to actively engage as technology transforms finance, to take advantage of new efficiencies and opportunities to improve financial inclusion, while safeguarding financial stability and consumer protection.

The World Bank Group is helping our client countries in various ways:
o The International Finance Corporation invests in private-sector fintech providers to promote the growth of responsible inclusive finance providers that serve tens of millions of customers across emerging markets.
o The World Bank is helping governments to adapt legal, regulatory, and supervisory frameworks, modernize financial infrastructures and payment systems, and ensure high standards of consumer and investor protection.

The Bali Fintech Agenda can be downloaded here:
documents.worldbank.org/...

Expert: Erik Feyen
 

Fintech is a diverse field and needs professional across fields - technology, business, marketing, regulatory and policy making to name a few. So there are many entry points!

Expert: Harish Natarajan
 

This is indeed a concern and calls for effective regulation and supervision. The role of infrastructures, their design, governance also matters. new approaches that rely on verifiable credentials and new types of encryption can are also relevant.

Expert: Harish Natarajan
 

When we breakdown the remittance price by provider type (fintech, traditional money transfer operator) etc. we do see that digital remittances are lower priced. Please see  remittanceprices.worldbank.org/ for full details.

Expert: Harish Natarajan
 

This is precisely the topic of the future of finance series. Please see the policy summary, chapeau and technical notes at  www.worldbank.org/...

Expert: Harish Natarajan
 

Effective regulation and supervision; product design; and public - private collaboration; and financial and digital literacy are key for these

Expert: Harish Natarajan
 

yes, absolutely. Innovation hubs being setup in many countries is an example. Please see the regulation technical note in the Future of finance series for a discussion on this.

Expert: Harish Natarajan
 

In the financial services sector, risks of money laundering and other forms of illicit finance are important -- and fintech and digitalization of financial services can certainly contribute to these risks.

The Financial Action Task Force (FATF) sets international standards to ensure national authorities can effectively go after illicit funds and is closely following developments. For more information, please visit  www.fatf-gafi.org/.

The World Bank helps countries build capacity to pursue the ‘dirty money’ that flows through the global financial system and is a strong voice for developing countries in global forums such as the FATF.

Expert: Erik Feyen
 

Key policy reform to expand inclusion, competition, and development of several Fintech models.
Enables entry of new players and new business models, which can result in more tailored products, lowering prices, and enhancing competition.

Expert: Harish Natarajan
 

Thank you for the question. Fintech is already affecting competition and market structure of the financial sector.

To better understand this dynamic, we conducted a survey and found that banks and fintech firms did not see each other as competitors. Respondents tended to see the greatest competitive threat coming from institutions that are similar to them. Banks mostly saw other banks and neo-banks as a bigger competitive threat than other fintech players. Fintech firms expected to compete with other new types of players such as big tech firms, platforms, or aggregators.

You can read more about the survey here:
documents.worldbank.org/...

Expert: Erik Feyen
 

WBG provide financing and technical assistance to public authorities and IFC provides direct financing to private sector. Specifically: Institutional strengthening: Capacity building for financial sector regulators and other authorities to navigate the fast-changing landscape harnessing the potential and mitigating risks; modernization of core central bank and financial sector regulatory functions through extensive use of technology; and supporting greater adoption of technology by financial institutions: for (e.g.) commercial banks, microfinance institutions, insurance companies and credit unions.

Legal, regulatory and policy framework: This encompasses support for the review of existing frameworks and identifying potential reforms that would provide a more conducive environment for responsible innovation and broader adoption – for (e.g.) support for and design of innovation facilitators; and reforms of legal, regulatory and policy framework for removing barriers, addressing gaps and safeguarding against risks (cyber, discrimination, exclusion, breach of data and privacy; aggressive selling etc.).

Financial infrastructure: Support to country authorities spans legal and regulatory aspects to institutional arrangements and support to design and implementation of financial infrastructures underpinning efficient functioning of DFS and digital economy – for (e.g.) payment systems, credit reporting systems, asset-based lending platforms and KYC registries.

Harnessing DFS for development impact: Supporting countries to harness the potential of DFS to achieve financial inclusion; access to essential services (new billing and payment models for water, electricity etc), access to finance for MSMEs and agriculture sector; protect against risks; mobilizing financing for investment needs in the public and private sector; disaster risk management (e.g. index insurance, adaptive social protection); adoption of clean energy solutions; and improve service delivery and functioning of government (social benefit transfers, public sector salaries, tax collection).

Foster international collaboration and co-ordination: Foster development and adoption of consistent approaches to address issues that require global collaboration and co-ordination – for (e.g.) cross-border payments, global stablecoins and cross-border provision of financial services.

Expert: Harish Natarajan
 

As Makhtar mentioned fintech can make finance more accessible to rural communities. The digitization and adoption of fintech approaches by rural financial institutions like SACCOS would be key.

Expert: Harish Natarajan