Heather Cover-Kus, Economic Officer in the Small States team at the Commonwealth Secretariat, discusses how financial technology or fintech is stepping in to help in the response to coronavirus.
A mere four months ago, many of us had never heard the term coronavirus, yet now the novel coronavirus and COVID-19, the disease it causes, fills our news feeds – and our thoughts— every day.
In an attempt to contain the virus and slow its spread, about a third of the world’s population is currently under some form of restriction. Lifestyles and livelihoods have been upended. The way we work, travel, interact with others, learn, and socialise have all changed drastically in the space of a month.
While it is not clear how long these measures will have to stay in place, it is easy to believe that the longer they remain, the less likely things will ever completely return to business as usual. After all, as the old saying goes, it takes 21 days to form a habit.
Society’s attitude to technology also seems to be drastically changing. Many people are more readily embracing digital ways of doing everyday things – from online meetings while working at home to virtual schooling and doctor’s appointments. More significantly however, innovative technologies, like artificial intelligence (AI) and blockchain, are being used to help countries fight the pandemic and its economic consequences.
AI, computer code that allows computer programmes to mimic human intelligence and decision making, is being deployed to quickly scan the thousands of research papers written about the virus and identify useful insights and connections with the aim of developing vaccines and treatments. AI has also been used to predict epidemics and likely outbreak hotspots as well as to decrease the burden on healthcare professionals through robotics.
Similarly, blockchain technology, has been used to develop a COVID-19 tracker that publishes up-to-date, accurate and trusted information on the spread of the disease. Blockchain is a way of storing and verifying information that uses a database with many copies which update automatically. Once entered on the blockchain, the information cannot be changed. It is no surprise then that health insurance companies and medical aid firms in Asia have started to use blockchain technology to reduce the paperwork required for coronavirus related claims and payments.
Blockchain and digital financial services, two of the technologies which fuel fintech, are playing a key role in addressing the financial fallout from the coronavirus pandemic. China has fast tracked more than $200 million USD loans to 87 businesses impacted by the virus through a pilot cross-border blockchain finance platform.
Several governments are also encouraging the use of contactless payments through digital financial services, in an effort to minimise the spread of the virus through cash exchanged from person to person. In Kenya, mobile money providers have waived fees on transactions less than Ksh1,000 ($10 USD) for 90 days and have increased the daily transaction limits specifically to support SMEs. Europe has seen a 72% increase in the use of fintech apps since the social distancing and lockdown measures have been put in place across the continent.
However, this increased use of technology is not without its challenges. The rise in online activity has been matched by an increase in cyber-security threats. Using surveillance technology to track and manage the outbreak is also controversial. In some countries, wristbands, credit card transactions, smartphone location data, and CCTV video have been used to track infected people and monitor quarantine compliance.
Critics warn that while effective for managing the spread of coronavirus infections, the same technology may be abused after the pandemic is over to continue to monitor citizens and infringe on privacy. There are no easy solutions for managing the virus however. Even many low-tech measures employed to control its spread, such as shelter-in-place orders and government imposed curfews, raise difficult questions around the loss of civil liberties and freedoms that lie at the bedrock of modern democracies. But that is another blog for another day.
In addition to the primary health crisis, the coronavirus has also caused a secondary economic crisis. The IMF’s managing director Kristalina Georgieva noted that the global economy is expected to incur a recession at least as bad as the global financial crisis or worse. Developing countries, particularly those with high debt, will face an uphill battle with contraction in domestic markets coupled with reductions in foreign investment.
At the Commonwealth Secretariat, we are looking at a range of support for member states and it is likely our work on fintech will be a big part of this support.
Our forthcoming Commonwealth Fintech Toolkit will offer technical guidance on fintech and its applications, highlight key cybersecurity information, provide a framework for creating an enabling environment for fintech, and offer capacity development courses for fintech professionals working in government.
It seems this toolkit, and our wider fintech programme, are emerging at just the right time. It is clear that the challenges arising from the pandemic will require new approaches — which people seem more open to try. We know that when applied to the financial industry, technologies like artificial intelligence, blockchain, digital identity and digital financial services can transform the way businesses and countries operate. We have already seen the potential of digital currencies to improve financial inclusion and to help the banking system in small islands states recover more quickly after a natural disaster.
I suspect that by the time we are on the other side of this pandemic, coronavirus will have permanently changed much of what we do, and the financial system is no exception. To tackle this unprecedented crisis the world is openly embracing the possibilities provided by innovative technology.
The fact that the US federal government had considered releasing the payments of their $2 trillion USD coronavirus stimulus package as a central bank digital currency is an indication of how much attitudes towards fintech are changing. It is only a matter of time before fintech solutions become the new normal.
Until then, let’s stay safe, stay home, and wash our hands.