Latest News

Sharmista Appaya, a senior financial sector specialist at the World Bank Group, explores how technology can proliferate financial inclusion globally

This article is part of the Salzburg Questions for the Future of Finance series by the Salzburg Global Finance Forum.

Digital technology has the potential to greatly improve financial access and inclusion by revolutionizing the way financial services are delivered. We have already witnessed the impact of digital disruption in sectors like movies, food, and transportation. However, its impact on the financial sector is different. By leveraging fintech solutions, we can overcome the barriers of cost, speed, and accessibility, leading to a more inclusive financial ecosystem. Digital technologies offer an affordable way for the financially excluded- the majority of whom are women, to save for school, make a payment, get a small business loan, send a remittance, or buy insurance.

At the World Bank Group (WBG), we recognize three key dimensions of financial inclusion: access, usage, and quality of financial services. Over the past decade, mobile money has been particularly effective in reaching underserved populations and enabling financial transactions. Since its initial launch in Kenya in 2007, it has allowed individuals in remote areas or underserved communities to access their accounts, conduct transactions, and engage in financial activities without the need for physical bank branches. Digital financial services have also shown promise in areas such as Government to Person payments, cross-border remittances, and the use of alternative data for credit scoring and has importantly supported the rise and prominence of non-bank financial services. During the COVID-19 crisis, digital delivery channels have played a vital role in enabling secure and efficient cash transfers and emergency liquidity, supporting vulnerable consumers, and reducing physical contact.

However, despite these advancements, we are constantly searching for the next silver bullet beyond mobile money. In addition to leveraging fintech solutions, the role of digital public infrastructure (DPI) is crucial in improving financial access and inclusion. Digital public infrastructure refers to the foundational building blocks that support the digital economy, including robust payment systems, digital identification systems such as the Aadhar in India, and reliable broadband connectivity. Issues such as limited internet connectivity, lack of digital skills, and affordability of devices hinder the widespread adoption of digital financial services. Moreover, policymakers also face the challenge of fostering fintech innovation while ensuring financial integrity, stability, and consumer protection. The disruptive nature of fintech, coupled with potential risks like fraud, competition issues, and data leakage, necessitates proactive measures to safeguard consumers. Regulatory sandboxes and evolving frameworks are being explored to enable innovation while maintaining necessary safeguards.

I believe that ultimately financial inclusion is not only a goal in itself but also a catalyst for economic growth and stability. By providing basic financial services to the remaining 1.4 billion unbanked individually, particularly those who are marginalized, and impoverished, financial inclusion contributes to the achievement of the UN Sustainable Development Goals for greater inclusivity and empowerment. In a world where access to financial services and high-speed broadband internet is not universal or affordable, digitalization can democratize access to finance and the world can move closer to achieving financial inclusion.

Sharmista Appaya is a senior financial sector specialist in Finance, Competitiveness, and Innovation Global Practice at the World Bank Group, where she analyzes FinTech and its application to financial inclusion. She works to support governments in emerging economies to identify key regulatory and policy challenges and solutions to enable fintech products, services, and business models. Prior to joining the World Bank, she was the head of the Fintech Accelerator at the Bank of England in London, looking at innovative firms and technologies to understand both the applications of and implications on central banking practices.

The Salzburg Questions for the Future of Finance is an online discussion series introduced and led by Fellows of the Salzburg Global Finance Forum. The articles and comments represent opinions of the authors and commenters and do not necessarily represent the views of their corporations or institutions, nor of Salzburg Global Seminar. Readers are welcome to address any questions about this series to Salzburg Global Communications Manager, Aurore Heugas: aheugas@salzburgglobal.org.