Regulators are prioritizing fintech initiatives to increase financial inclusion
Financial regulators around the world continue to recognize the importance of fintech business models in promoting financial inclusion as economies recover from the COVID-19 crisis, along with using technology to address evolving consumer risks associated with digital financial services, according to a new survey from The Cambridge Center for Alternative Finance (CCAF) at the University of Cambridge Judge Business School and the World Bank.
The results of their third Global Fintech Regulator Survey, which aims to provide information that regulators can use to benchmark, evaluate and prioritize policy responses to fintech developments, highlight that COVID-19 continues to be a catalytic force, particularly in emerging markets and developing economies (EMDEs), for the financial authorities to prioritize fintech-related initiatives. This is illustrated by the fact that 56% or respondents from EMDE increase the priority of fintech, compared to 35% of respondents in advanced economies (AE). This is most acutely observed in sub-Saharan Africa, where 75% of respondents report an increase in fintech prioritization.
This study builds on findings from the survey responses of 128 financial authorities in 106 jurisdictions worldwide, with nearly 70% of respondents monitoring fintech developments in EMDE. The survey is one of the largest empirical studies to date on regulation and supervision of fintech aimed at financial authorities.
However, the survey also reveals that while these fintech-related initiatives align with overall goals, financial authorities still have significant concerns about mitigating existing and emerging consumer risks – particularly cyber security (78% of respondents), fraud and fraud (67% of respondents). up from 18% in the 2020 survey), and in the digital assets sector.
Furthermore, the survey highlights that Digital Regulatory and Supervisory Infrastructure (DRSI) as well as supervisory technology (suptech) initiatives are playing increasingly prominent, important roles in supporting and enabling financial authorities on fintech, particularly with regard to consumer protection.
“This comprehensive data set provides a unique insight into the world of fintech regulators and their respective institutions at a time of rapid change in digital financial services globally,” said Bryan Zhang, co-founder and CEO of CCAF. “We hope that the data and insights generated from this global survey will inform the work and practice of fintech regulators, supervisors and policy makers, assist them in benchmarking responses, frameworks and activities, and facilitate meaningful peer learning and knowledge sharing.”
“At the World Bank, we are seeing a growing demand from client countries for data-driven risk assessment tools in financial services,” says Jean Pesme, Global Director of Finance, Competition and Innovation, World Bank Group. “In addition to seeking insight into the management of persistent and new risks, the survey has also examined how and where regulatory authorities use different types of digital infrastructure to strengthen regulatory and supervisory functions. Understanding and mitigating risks is key – the survey and experiences around the world also show that this can be done while harnessing fintech’s huge potential for financial inclusion and access to finance.”
“The UK is proud to partner with CCAF and support their third global FinTech Regulator Survey, produced with the World Bank,” said Sian Parkinson, Inclusive Digital Finance Lead, UK Foreign, Commonwealth and Development Office. “The UK is committed to the development of FinTech nationally and internationally, supported by regulatory environments that enable innovation, as well as protecting people and businesses. The report’s findings share valuable insights for the development of future policy and regulation, to ensure that FinTech continues to increase its reach , protect consumers, deepen domestic capital markets and accelerate economic growth globally.”
The survey also shows that the financial authorities, especially those in EMDE, seek significant support to balance the benefits and risks of increased digitization of financial services.
