Financial sector embraces technology
The era of financial technology (Fintech) is well and truly alive, with many countries either having or working on strategies to accommodate this development.
Fintech is described as any technology or innovation that aims to compete with traditional financial methods in the delivery of financial services.
Speaking at the recent high-level conference on the Bali Fintech Agenda, co-hosted by Bank of Botswana and the International Monetary Fund (IMF), IMF’s Deputy Director, Monetary and Capital Markets Department, Aditya Narain stressed it is increasingly evident that technology is the future of the financial sector.
Referencing a survey carried out on the Fund’s global membership regarding Fintech developments, Narain said it was apparent that countries are broadly embracing the model and working on creating an ‘enabling environment’.
“Most jurisdictions, irrespective of income level, aim at achieving universal coverage with open and affordable access to core digital infrastructure services,” he told the conference, adding it is expected Fintech will increase competition in the financial sector, especially in the area of payments, clearing, and settlement services, and to a lesser degree, in credit and deposit taking services.
According to Narain, there is an expectation that Fintech will expand financial inclusion for households and Small, Micro and Medium Enterprises (SMMEs), as well as reducing the urban-rural gap.
“However, there is only a modest expectation on the potential of Fintech to address the gender participation gap. In addition, a majority of jurisdictions have reported differentiated compliance requirements for Fintech products and services targeted at the unbanked and underserved populations,” he added.
On the risk side, Narain said it has been observed that a lot has to be done.
He, however, said most countries have identified gaps in which Fintech issues are not adequately addressed by their existing legal frameworks.
Furthermore, cyber risks have been identified as an emerging threat to the financial sector in the majority of jurisdictions.
Nevertheless, the African Sub Saharan region has been identified as having taken a lead, mainly in mobile money, resulting in radical change in the delivery of financial services and gains in financial inclusion.
“However, there are noticeable regional differences. East Africa has maintained an overall lead including in attracting Fintech investments. Southern and Central Africa have seen increases in delivery of six financial services through digital channels, but there is significant room for further gains,” concluded Narain.
Meanwhile, in his opening remarks, Minister of Finance and Economic Development, Kenneth Matambo, noted that the Financial Inclusion Strategy, which runs from 2015-2021, embraces Fintech as a key element.
“In addition, the Electronic Payments Services Regulations, promulgated in January 2019, promote an enabling environment for innovation in financial services delivery,” said Matambo.