The COVID-19 epidemic has hastened the use of digital financial platforms as the principal means of transaction execution. As a result, it’s become increasingly crucial to ensure that all consumers and small companies have access to critical technologies.
Financial technology enables banks and start-ups to provide a broader range of services that are tailored to the demands of their consumers. While there have been examples of tremendous increases in financial inclusion in some areas, progress has been uneven, and there is still much to learn globally.
The conversations in the Council were on six key points, and it was impressive to see how much digitally enabled financial inclusion, as well as digital assets and net zero, dominated the discussions. This digital revolution gives various possibilities to stakeholders across the financial system, three of which will be discussed below.
Accelerator 1: Digital ID as a driving force in our digital future
Financial technology, or fintech, is increasingly filling a void in the traditional banking system’s financial services industry. Digital identification systems for individuals and businesses provide significant opportunities to digitally supply financial services that were previously unavailable to about 1.7 billion of the world’s adults. Furthermore, effective digital infrastructure and inventive new payment procedures will assist not just unbanked and underprivileged populations, but will also guarantee that e-commerce and trade financing continue to evolve and become more accessible.
In a digital economy, the introduction of new business models necessitates the development of creative frameworks to create trust in data exchange and management. Further progress will need strong coordination between corporate and public entities in the formulation and implementation of digitally smart regulation at the local level. A fit-for-purpose regulatory approach to digital financial services and cross-border money transfers within the fintech ecosystem might encourage growth and enable continuous advancements in digital banking and digital payments.
Accelerator 2: Assisting SMEs in Recovering
Small and medium-sized companies (SMEs) are the backbone of local communities and the cornerstone of the global economy. They are job creators, community builders, opportunity enhancers, and proponents of innovation, competition, and diversity. While the COVID-19 epidemic has been disastrous for small firms, digital technologies can help them recover.
Small and medium-sized companies (SMEs) are the cornerstone of the global economy and the backbone of local communities. They are job creators, community builders, facilitators of opportunity, and drivers of innovation, competitiveness, and diversity. While the COVID-19 epidemic has had a catastrophic impact on small firms, digital tools can provide a road to recovery.
3rd Accelerator: Improving Access to Digital Investment Services
According to a case study undertaken by Tsinghua University’s PBC School of Finance, digital services significantly impacted consumer behaviors and provided actual advantages to individuals at the peak of the epidemic in China.
Chinese asset managers used the internet to reach new consumers who would have previously purchased their goods at a bank office. They have improved their digital offerings to better communicate with their consumers after purchasing wealth management products.
During the epidemic, Chinese individual investors’ involvement with digital wealth management services has risen dramatically (Figure 1 shows the growth in the rate of change in the adoption of digital products by consumers). In China, the COVID-19 epidemic is acting as a game changer, causing investors’ behavior to shift for the better after they have experienced the convenience and efficiency of digital financial services. One reason for this ‘stickiness’ could be that, when compared to traditional wealth management offerings, the digital wealth management model provides consumers with additional benefits such as more efficient service provision, lower transaction fees, and a more personalized customer experience through big data, among other things.
Nonetheless, despite the quick surge in popularity, there are still issues with this new paradigm, one of which is investor education. As consumers become more sophisticated in their usage of investment goods, digital service providers must develop more imaginative methods to educate their clients about the products they provide and provide them with ongoing education.
To summarize, the route to recovery and financial inclusion will be substantially driven by digital technologies, as well as joint efforts by financial institutions, governments, and technology sectors to provide fair and equal access to everyone.