According to new Global Findex data released last year, it was revealed that since 2014, 515 million more adults globally have gained access to the financial tools they need. As of 2018, 3.8 billion people—almost 70% of all adults—are now financially included. However, according to H.M. Queen Máxima of the Netherlands, who is the United Nations Secretary-General’s Special Advocate for Inclusive Finance for Development, there is still much to do.
In a recent report by the UNSGSA FinTech Working Group and CCAF titled Early Lessons on Regulatory Innovations to Enable Inclusive FinTech: Innovation Offices, Regulatory Sandboxes, and RegTech, Queen Maxima said: “FinTech presents amazing opportunities to empower the unbanked to protect themselves against hardships and invest in their futures. FinTech solutions can make products and business processes cheaper, faster, and more customer-centric by improving users’ experiences. FinTech can also drive more competition and collaboration between traditional players, start-ups, and tech companies.”
However, she warns that technology is a double-edged sword. Innovations can sometimes amplify threats to consumers, such as large- scale frauds, data privacy breaches, and cybersecurity risks. Technology can also leave behind unconnected and less digitally literate consumers. These new risks, speed, and complexity of FinTech can trigger regulatory overreactions that stifle innovation.
“For many regulators in emerging and developing economies, creating the regulatory tools to keep up with the fast pace of innovation is extremely challenging— particularly in countries that lack resources and staff with the technology skills to understand FinTech’s rapid development,” she added.
Similarly, Managing Director of the Monetary Authority of Singapore Ravi Menon described how FinTech promotes financial inclusion, enhances customer experience, and enables delivery of financial services at lower costs and faster speeds, allowing providers to reach out to the unbanked and uninsured segments of the community. However, he also expressed a cautionary note saying: “Like all technologies, FinTech is not without risk. Financial regulators play an important role in ensuring the balance between promoting innovation and controlling risk, especially in emerging and developing economies.”
The UNSGSA FinTech Working Group and CCAF report is designed to help regulators, especially from emerging and developing economies, as they consider their own approaches for regulating FinTech. It reviews early lessons learned on innovative regulatory initiatives such as regulatory sandboxes, innovation offices, and RegTech. It also contains a set of Implementation Considerations for regulating innovation.