Digital innovation essential for financial inclusion

October 19, 2022

At the recent Sibos annual conference, digital innovation was pinpointed as very significant for financial inclusion. Sibos is an annual networking event delivered by Swift for the financial industry. Beginning as a seminar in 1978, the event has developed into a leading forum for the global financial community to explore and collaborate in areas of payments, securities, cash management and trade. This year’s conference agenda prioritised progressive finance for a changing world, with over 500 representatives discussing areas such as supporting the digital landscape to manage uncertain times and promote sustainability.

At the event, digital innovation was discussed as holding tremendous promise for financial inclusion and financial health. The underlying theme of the conference was focusing on progressive finance in a changing world that could not come at a more critical time.
There has been significant progress in the last few years, with approximately a quarter of the global adult population having secured access to financial services. More adults are included in some manner, enabling new opportunities for millions of previously disconnected. Investment in vital digital infrastructure, including enhanced connectivity, has delivered the foundations for further development. The rise of digital payments has spurred a considerable increase in account ownership. In the last few years, nearly 40% of adults in developing economies opened their first account to receive a wage or a government payment. Furthermore, millions of small merchants are either paid or make payments via their phones. This has enabled financial service providers, particularly new fintech players to be more innovative in the delivery of new products. The rise of mobile activity and new customer data channels by leveraging big data and AI means more creative and innovative ways to deliver financial products.

With every new technology, such as digital currencies, we must remember to focus on the problem, the solution, and what future we are visualising to enable long-term success. The conference message discussed that one of the priorities is ensuring innovation doesn’t create harm but delivers key digital services, like cybersecurity and digital literacy, that can support marginalised communities to manage their financial services safely and efficiently. Fairer competition and innovative payment systems were also discussed, as supporting markets work better, including for small-scale customers, but this was considered only the start, and there is the opportunity to move beyond not harm to implement positive changes.

Representatives at the event explained innovation shouldn’t happen just to maximise short-term returns. Instead, we should focus on the value generated in the long run. The value of customers translates into value for firms. Members were asked their opinions on managing their finances, planning and meeting future goals during periods of disruption and building further resilience. All of these factors were considered good business sense since financially healthy customers are better customers, and businesses that can provide these services differentiate themselves from others.

For the moment, only 55% of adults in developing economies can access emergency money within 30 days, and another study indicated that nearly half of respondents from OECD nations have no money left at the end of the month. In some areas, we have witnessed an increase in access to finance and, at the same time, a decline in financial health. We must determine the best solutions to these challenges and bring them to scale. Focusing on finding an approach to solve the reduction in financial health could be through encouraging partnerships that provide services within the entire value chains. Collaboration across the industry and government is critical to creating an inclusive digital infrastructure that enables services beyond finance, like health and education. These represent the foundations of sustainable development. If this is managed correctly, digital innovation holds great potential for financial inclusion and financial health. We should focus on a better future with shared experiences and use events like this to deliver a more secure, trusted and effective digital future that works for everyone.

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