Financial technology can spur financial inclusion by facilitating payments, but the opportunities come with challenges, according to a new report by the Committee on Payments and Market Infrastructures (CPMI) and the World Bank.
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The report, Payment aspects of financial inclusion in the fintech era, connects fintech innovation with financial inclusion, providing a framework for incorporating and leveraging technological opportunities to promote access and use of transaction accounts, while also addressing potential challenges.
“Technological innovation has made major inroads into financial services, which has implications for payments and their key role for financial inclusion. While fintech can support improved access to safe transaction accounts and encourage their frequent use, it is not a panacea and there are risks that need to be managed”, according to Sir Jon Cunliffe, Chair of the Committee on Payments and Market Infrastructures and Deputy Governor for Financial Stability of the Bank of England.
Fintech can contribute to improved design of transaction accounts and payment products, make them ubiquitously accessible with enhanced user experience and awareness. It can make services more efficient and lower market entry barriers. Still, these benefits bring risks, in terms of operational and cyber resilience, protection of customer funds, data protection and privacy, digital exclusion and market concentration. If not adequately managed, these risks could undermine financial inclusion.
“Incorporating fintech into the PAFI framework will help firms and policymakers extend payments services to the poor, the first step for expanding access to other important services, such as credit and insurance,” said Ceyla Pazarbasioglu, Vice President for Equitable Growth, Finance and Institutions (EFI), World Bank Group
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