Countries need to adopt policies aimed at stimulating investment to address digital infrastructure deficits and harness the benefits of financial technology (fintech), according to Tokyo-based think tank Asian Development Bank Institute (ADBI).
In a blog, ADBI vice-chair of research and senior research fellow John Beirne and research associate Ngoc Dang said the increased use of fintech during the pandemic has been an important aspect in enabling many micro, small and medium enterprises (MSMEs) to remain economically viable, with financial services being faster, more efficient and cheaper than traditional banking.
Citing earlier studies, Beirne and Dang said those related to insufficient levels of development in digital payments infrastructure, internet connectivity and broadband penetration are among the factors impeding the financial inclusion impact of fintech.
They added that harnessing the benefits of enhanced financial inclusion and inclusive growth brought about by advances in digital finance requires policy action aimed at enabling greater use of digital finance while also managing risks.
Beirne and Dang also underscored the need to address the main hurdles for policy makers relating to improving the level of digital and financial literacy across countries.
Earlier studies highlighted the importance of sufficient levels of digital and financial literacy for harnessing the financial inclusion impacts of digital financial services.
“Without having a sufficient level of competence in these areas, economies and communities may be unable to reap the benefits of fintech,” Beirne and Dang said.
Further, they said other constraints relate to effectively managing potential risks to financial stability and cybersecurity due to digital finance.
“A sustainable role for fintech for inclusive growth and development requires effective financial regulation and supervision to mitigate these risks, as well as the safeguarding of consumer trust concerns related to cybersecurity,” Beirne and Dang said.
Effective controls to manage the exposure to cyberattacks are key to ensuring consumer confidence in utilizing digital channels for engaging in financial services, they added.
Beirne and Dang also underscored the importance of international policy cooperation on regulation given the substantial cross-border implications of digital finance.
Source: PHILEXPORT News and Features
December 12, 2023
