A blog by: Akeem Rahaman, Economic Advisor, Sophie Brain, Research Officer, and James Gregory, Research Officer work in the Economic Policy and Small States Directorate of the Commonwealth Secretariat.
Since the last financial crisis of 2008/09, investments in technology-enabled financial services (‘FinTech’) have been growing. Likewise, during a time of socio-economic crisis, the COVID-19 pandemic has created and amplified the second wave of FinTech advancements, leading to increased financial innovation. It is evident that emerging technologies, such as artificial intelligence, big data, blockchain, digital identity and digital financial services are changing the financial landscape even in times of crisis.
FinTech innovations, such as mobile money, have been found to reduce poverty and income inequality and reduce the rural-urban income gap while increasing financial inclusion. In some cases, FinTech has also been shown to act as an enabler for entrepreneurship among rural residents. FinTech helps the most marginalised in society – including women and young people by increasing financial inclusion rates.
Harnessing the potential of FinTech to achieve the Sustainable Development Goals
Ahead of next week’s 2022 Commonwealth Finance Ministers Meeting, the Commonwealth FinTech Programme is releasing a new report ‘Commonwealth Countries: Driving FinTech Innovation'. As part of our knowledge products from the FinTech programme, a FinTech toolkit was developed and launched in 2020 to help governments leverage financial innovation. This new report compliments our other knowledge products and draws together the experiences of Commonwealth members, helping them to understand how they can continue to advance FinTech in their countries.
The evidence from this report suggests that opportunities are ripe for learning from Commonwealth FinTech pioneers, to support FinTech capacity building across the Commonwealth as well as prospects for partnering and knowledge sharing with other Commonwealth countries.
The growth and use of FinTech is not homogenous across Commonwealth member countries. FinTech applications, such as mobile money, that are popular in East Africa are different from those, such as central bank digital currencies (CBDCs), that are more common in the Caribbean.
About the Commonwealth FinTech Report
We describe what FinTech is and its classification by technologies and financial service applications. Given the many potential benefits of FinTech, the report explores multiple facets including FinTech for development, economic growth, financial inclusion, income inequality, women and youth and the sustainable development goals.
FinTech in the Commonwealth
We reviewed the main FinTech innovations, services and activities being utilised across the Commonwealth membership including mobile money and other digital payments, central bank digital currencies (CBDCs), enterprise technology provisioning, cryptocurrency, and alternative credit. The use of these FinTech innovations and activities was found to be country and region-specific, filling the gaps that currently exist within these countries and regions.
Identifying the Demand and Supply Drivers of FinTech
The reason why specific FinTech applications have grown more in some countries or regions than others is due to specific demand and supply drivers, which are at the core of the Commonwealth’s FinTech landscape as evident by our report. Demand-side drivers increase the need for technology-enabled financial services, while supply-side drivers provide an environment that facilitates FinTech growth.
Filling the Gap and Tackling Challenges in FinTech Adoption and the Way Forward
To help Commonwealth member countries deal with challenges in FinTech, our recommendations will focus on three areas:
- fostering financial literacy;
- improving digital infrastructure; and
- facilitating effective FinTech regulation, which can provide guidance for FinTech service providers moving forward.
Based on the findings of the report, a key driver of financial literacy is the promotion of financial inclusion, and other aspects of FinTech adoption. As such, the Commonwealth plans to focus on enhancing financial literacy, especially across Commonwealth developing countries and small states. The first step in this direction will be a Commonwealth FinTech event to be held in Washington D.C. on October 10th, which brings together a panel of experts on financial literacy and financial inclusion. The outcomes from this event will be presented at the Commonwealth Central Bank Governors meeting and chart a course forward for continued work on the development of a Commonwealth Financial Literacy Programme.
- Rena Gashumba Communications Adviser, Communications Division, Commonwealth Secretariat
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