H.M. Queen Máxima of the Netherlands, the United Nations Secretary-General’s Special Advocate for Inclusive Finance for Development (UNSGSA), provided a virtual keynote address to launch the Cambridge Centre for Alternative Finance’s (CCAF) Regulator Knowledge Exchange (RKE) on 1 December 2022.
Minister Mitchell, Professor Guillen, Ladies and Gentlemen,
As the UN Secretary-General’s Special Advocate for over the last decade, I’ve witnessed the remarkable progress that digital financial services and digital public infrastructure can bring.
Since 2011, a quarter of the world’s adult population has gained access to financial services, and three quarters of adults globally are now financially included.
Yet to reach the next level, more work is needed.
For these services to be truly impactful, they should meet customers’ needs, actively help build their financial health, and enable them to seize economic opportunities.
Today, three out of every five mobile money accounts are inactive or dormant, and the active use of savings, borrowing, and insurance remains limited.
Fintechs are already tackling this challenge.
Fintech start-ups are offering more tailored, faster, and cheaper products. They are often partnering with banks and mobile money providers to better serve their users.
Fintechs — like ShopUp in Bangladesh, OmniBiz and Flutterwave in Nigeria, and Bazaar in Pakistan — are helping entrepreneurs digitize their inventory management, marketing, payments, credit, and sales, in partnerships with banks and telcos. This has helped small businesses expand far beyond their brick-and-mortar origins, and connect to a much wider world.
But these innovations require new regulatory tools, both to foster positive outcomes, and to address risks — such as cyberattacks, privacy breaches, big tech domination, and algorithm bias.
And many countries lack the resources and skills to assess and balance the risks and opportunities.
That is why the work of the Cambridge Centre for Alternative Finance is just so valuable.
In 2019, my Fintech Working Group, together with CCAF, issued a report to help regulators learn about and address these challenges, especially in developing and emerging markets.
It contained a number of insights.
One, is that regulators need to be open to innovation — and there are a range of options to do this, depending on experience and resources.
An early approach can be to create an innovation office. Kenya’s Capital Markets Authority, for example, judged that this was sufficient to resolve the regulatory questions of most fintech start-ups.
That can then lead to more complex approaches. For example, the Monetary Authority of Singapore’s early experience with an innovation office allowed it to develop a regulatory sandbox, and to explore new regtech solutions.
Another insight from the report was that inter-agency coordination is crucial.
Many financial innovations cut across several regulators’ mandates, and collaboration is needed to make regulation effective.
In the Netherlands, for example, the central bank and financial markets authority jointly run a single innovation office — allowing them to speak with one voice.
Finally, while improving the regulatory environment is crucial, for digital finance to thrive, we also need supportive policies and infrastructure.
Greater connectivity, and digital IDs, can increase access to financial services to millions previously left behind.
Fair competition, and interoperable payment systems, can help markets work better for even the smallest-scale customers.
Cybersecurity, data governance, and digital literacy can help marginalized communities navigate these changes in ways that work for them best.
At every stage of innovation, let us ask how it will impact the lives of the poor and underserved, and how can innovation make their lives better? What can regulators do to incentivize innovation and create the space for it to flourish through TechSprints and design challenges?
This means thinking differently about consumer protection. For instance, how will these innovations affect redress mechanisms, or ensure sufficient disclosure? Could authorities include the regulatory expectation that financial services not only do no harm, but actively do good?
Around the world, we see inspiring examples of infrastructure being developed in a way that works for ordinary people.
India Stack, for example, combines ID cards, a payments interface, and account aggregators in one easily accessible platform.
We can also learn from Brazil’s interoperable payments system, or from the Philippines’ modular and open-source digital ID system.
So, I am delighted to see the CCAF Regulatory Knowledge Exchange taking a lead in facilitating this work.
Working with over 120 jurisdictions, and more than 230 organizations, it has significant potential to have impact.
So let us share this knowledge, and working alongside international institutions, go the extra mile.
Together, we have a unique opportunity to build an inclusive digital financial sector, with the real power to improve people’s lives.
Let us embrace this moment.
Thank you very much for all your efforts.