Fintech can spur financial inclusion by facilitating payments, but it is not a panacea and comes with risks that need to be managed, concludes a report by the Committee on Payments and Market Infrastructures (CPMI) and the World Bank.
Financial inclusion starts with payments, which act as a gateway to other services, such as savings, credit and insurance, argues the report.
At the heart of payment services are transaction accounts operated by regulated providers, that can be used to improve financial inclusion by enabling users to meet most of their payment needs and to safely store some value.
The fintech revolution offers an opportunity to improve the design of accounts and payment products, make them ubiquitously accessible, enhance user experience and awareness, and achieve efficiency gains and lower market entry barriers, says the report.
However, these benefits come with certain risks in terms of operational and cyber resilience, the protection of customer funds, data protection and privacy, digital exclusion and market concentration.
Therefore, say the authors, it is vital to have effective regulatory, oversight and supervision frameworks that encourages responsible innovation and does not exclude the disadvantaged.
The report concludes: "To realise fintech’s potential to improve financial inclusion, initiatives need to be appropriately embedded in wider country-level reforms and global efforts that seek to put the Pafi [Payment aspects of financial inclusion] guidance into practice."
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