Finance in a Changing World

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.

Both Governor Bowman and Commissioner Johnson delivered keynote speeches at the 2023 Salzburg Global Finance Forum. The Finance Forum brings together senior and rising leaders from the financial industry and public sector at Salzburg Global Seminar, with the focus this year on “Global Turbulence and Financial Resilience: Implications for Financial Services and Society”.  

Over the course of several days from June 25-27, 2023, Fellows tackled critical issues affecting the future of financial markets and global economic stability.  Discussions centered around the recent US bank failures, financial technologies, banking regulation, the growth of nonbanks, and digital currencies, among other topics.  

In her keynote speech, Governor Bowman called for responsible reform of the banking regulatory framework, specifically in the United States. The bank failures of Silicon Valley Bank, Signature Bank, and First Republic Bank “highlighted the need for regulators to consider reform efforts to make the financial system stronger and more resilient… These bank failures and recent stress in the banking system have highlighted key deficiencies in risk management practices and key deficiencies in supervisory priorities.”  

Her remarks addressed “the importance of a responsive and responsible regulatory framework.” She emphasized the principles of transparency, accountability, efficiency, and due process in any reforms.

Furthermore, these reforms should be informed by “an impartial and independent review of what led to the failures and healthy public debate.” An understanding of the root causes of bank failures is crucial for making necessary changes and avoiding potential harm to banks, customers, and the broader economy. “We must be circumspect about what went wrong, deliberate about what to fix, and cognizant of unintended consequences,” she advised. 

Governor Bowman advocated for regulatory reforms that strike a balance between safety and soundness, competition, and the ability of banks to serve their customers while avoiding undue burdens that could hinder economic activity. She emphasized that reforms to "banking regulatory and supervisory policy... should be focused on promoting a safe and sound banking system." 

Further speaking on the need for reforms, Commissioner Johnson elaborated on how we can future-proof financial markets and their regulation “by balancing responsible innovation with accountability.” She focused on how to safely harness the potential of emerging financial technologies while adapting regulations to them. Her speech highlighted the challenges faced by financial markets, such as supply-chain disruptions, volatility, and inflationary pressures. 

Regarding new financial products and platforms, including those in the crypto markets, Commissioner Johnson advocated for subjecting them to longstanding regulatory principles which "ensure customer protection, market integrity, and market stability.” There should be an awareness of risks in the digital asset ecosystem, as recent bankruptcies associated with the “crypto winter” demonstrate that "without sufficient risk management, corporate governance, and conflicts of interest guardrails, vertical integration may present endemic conflicts of interest and risks.” 

She highlighted the importance of customer confidence in banking institutions, stating that bank regulators are obligated to ensure that “banks demonstrate responsibility and accountability” to maintain public trust. This consideration is especially relevant in the context of recent bank failures. 

Non-bank financial institutions (NBFIs) are increasingly important in the global financial system and have become interconnected with traditional banking institutions. Commissioner Johnson pointed out that the rise of NBFIs raises two significant issues, namely for bank regulators to “increase our vigilance regarding oversight of known systemically important financial institutions as well as appreciate new sources of risk.” 

Overall, Commissioner Johnson called for introducing and enforcing regulations to ensure customer protection, market integrity, and stability in crypto-commodity derivatives markets and other vulnerable retail markets. She also recommended greater due diligence and regulatory oversight in acquisitions of significant equity ownership stakes in CFTC-registered entities. 

Governor Bowman and Commissioner Johnson share common ground in advocating for responsible regulatory reforms that prioritize the safety and soundness of the banking system, while also considering competition, customer service, transparency, accountability, and the potential consequences of reforms. They emphasized the importance of customer protection, market integrity, and regulatory oversight in addressing the challenges faced by the financial markets. 

The memorable remarks delivered by Governor Bowman and Commissioner Johnson helped inform the ensuing discussions by Finance Forum Fellows on how to forge a financial landscape that not only withstands bouts of uncertainty but also embraces the promise of innovation.

Michelle W. Bowman has been serving as a member of the board of governors of the Federal Reserve System since 2018. Prior to her Board appointment, Michelle served as the Kansas State Bank commissioner from January 2017 to November 2018, before which she was vice president of Farmers & Drovers Bank in Kansas from 2010 to 2017.

Read Governor Bowman’s full remarks here.

Kristin Johnson was sworn in as a US Commodity Futures Trading Commissioner in 2022, after holding endowed professorships at Emory University and Tulane University Law Schools. Kristin is a nationally recognized expert on financial markets risk management law and policy with specialization in the regulation of complex financial products. She is an internationally recognized expert on financial markets regulation and corporate governance, compliance, and risk management.

Read Commissioner Johnson’s full remarks here.

Byron spoke to Salzburg Global during the Finance Forum, "Shaping the Future of Finance: Carbon Markets and Pricing, Digital Money and Financial Regulation." This program took place between June 13 and June 15, 2022.

“I came to Salzburg Global in 2013 and it was recommended to me by Walter Massey who was a former board member. I had become a public company's board member and so I thought the board work would be good. I also felt that the international exposure would be good, and it's been better than I anticipated. It has resulted in me becoming more of a global citizen. I'm far more aware of other people and other cultures. Most importantly for my company, it has made me a much better investor and risk manager, because now I view all investments in risk from a global perspective. It's been extremely valuable for Dynex Capital, which is where I work, in making investment decisions and most importantly, managing risk. I've brought many of these people back to my company to talk to us about either their expertise or their countries. I was very narrow-minded before coming here in 2013. That was a big year. I spent two weeks in China, and then I followed up and started the Finance Forum here in August of that year. 

“I'm a happy man that I joined the Salzburg Global board, it’s been great. This was an out of my comfort zone move to join the Salzburg (Global) board and to just begin to come here, and it's been fantastic. My mind is much broader. One of the big results has been a real respect for other people's cultures; recognizing the differences in how they may have been raised or the environment where they grew up in (...). People have a right to be who they are, and that's part of the sentiment of Salzburg (Global). It was started after World War II to try to bridge the divides across continents, and I absolutely have grown to believe heavily in that. I believe global cooperation is possible. I also believe that there will always be humans on the planet who don't care about global cooperation. They will always want to take what someone else has. (…) As long as that exists, the world will always need an organization like Salzburg Global Seminar making attempts to expose human beings to each other and to give a much broader perspective to the world or opening the door for someone to walk through and get a broader perspective to the world.

“Many people who I have met don't have a real idea of what the world was like after World War II. I read a book called Savage Continent. It was describing Europe right after the war, and it just sounded horrible. For them (the three founders) to have the foresight to say, 'let's start an organization to try to bridge the divide across continents', was a great vision. And just like human beings created those problems 75 years ago, human beings can create those same problems today. Salzburg (Global) has a job to continue to try to bring people together from all over the world.

“I have lived a life outside of my comfort zone. I went from growing up in an all-black area of Saint Louis, Missouri (United States) in 1977, to going to an all-white college in northern New Hampshire. That was a major 'out of my comfort zone' moment. But what's amazing is when you are not exposed or never interact with someone who is not like you, you form the wrong opinions about them. If left unchecked, those biases can create wars and violence. So Salzburg Global's purpose is extremely vital today. There are tons of wars all over the planet. We've had more strongmen - or what I would call non-democratic thinking people - rise to power across the globe. It looks like they're going to support each other. We need good humans, and I absolutely believe there are good humans. You need good humans to lock arms together and to push back against bad humans. That's my true belief. Salzburg (Global) has a real purpose there. The genesis of why this organization was started continues to be a need for the world today.”

Byron Boston is the Chief Executive Officer and Co-Chief Investment Officer of Dynex Capital. He has been a member of Salzburg Global Seminar’s Board since 2013.

Daniel spoke to Salzburg Global during the Finance Forum, "Shaping the Future of Finance: Carbon Markets and Pricing, Digital Money and Financial Regulation." This program took place between June 13 and June 15, 2022.

Mako Muzenda, Salzburg Global Impact Fellow: How did you hear about Salzburg Global and what inspired you to become involved as a board member?

Daniel Mminele: “I got alerted to Salzburg Global through a former colleague and friend who used to be on the board. He was the deputy governor at the Bundesbank at the time when I was deputy governor in the South African Reserve Bank. We both were responsible for the international portfolios, which meant that we got to meet each other quite often. He started telling me about the (Salzburg Global) Seminar. I was quite surprised that I had never heard about it before. He said to me that the organization is reinventing itself and looking to change, in particular with regards to increasing its global visibility. Hitherto it has been essentially an Austrian-US affair and there was a deliberate effort to also diversify the board. And he says, 'look, given how I know you, the kind of work we've been involved in and the mission, I think there's quite a bit of compatibility there and I think you would like the place'. When I then started reading up about it I thought, wow, this is really a unique place. The programs, the content of it seems to me to be responding to the challenges that the world is facing. It seemed that this could be an interesting place for one to make a contribution. That then resulted in me having some conversations (…), and that culminated in me being invited to join the board. And that happened on the 17th of June (2021). 

“Obviously it was a little bit different in the sense that you are joining a board in a remote setting. Having had the opportunity to come and experience the Schloss and experience the surroundings, the ambiance, the atmosphere and participate in the Finance Forum, I now start to get a sense and feel of what the magic is (…) that everybody is talking about. It's fantastic. It's good now to also get to know the colleagues on the board a little bit better. I've attended the first in-person board meeting that took place in March in London, but this is my first sort of visit to put into the philosophy.”

MM: Why is Salzburg Global still significant 75 years after it was first established? 

DM: “Over the years, the (Salzburg Global) Seminar would have made sure that it stays and continues to stay relevant to its context, to what's going on around it, and to constantly ask that question of how do we bring future leaders and current leaders together? What are the pertinent issues that are on people's minds that we need to provide a forum for safe, constructive exchange? I would imagine that it is because of that that they've been constantly paying attention to making sure that they continue to create a space where people don't necessarily find answers to the questions that we're facing, but where you can help people, exchange views, and at the very least talk about how they think about the questions on the way to try to finding solutions.”

MM: What do you hope to impart in this space? What do you want to contribute and leave behind when you go back to South Africa? 

DM: “As a contributor to the Finance Forum, I was on a panel on carbon markets and pricing. I shared a mini case study on South Africa and how South Africa is making a contribution to the global effort to address climate change as part of a response policy. I talked about the carbon tax and offset arrangements that have been put in place in South Africa. South Africa is highly dependent on fossil fuels, about 90% of its electricity generation on coal. There's been a deliberate effort as part of the contribution that was submitted to the COP26 conference to move away from that and to decarbonize the economy, to transition it to a low carbon economy and one that is more climate resilient. I was sharing in this particular space carbon tax and entitlement credits and how they can be offset and traded. That is one of those things which I think is very, very important. And similarly, I take back with me lots of discussions that I was part of where I learned a lot around the issues around digital currencies, in particular central bank digital currencies, issues around regulation, issues around how one takes these various changes and influences that are buffeting us. It's that rich exchange of being able to give something, but certainly lots to take back as well. This is a phenomenal space to be in and I'm very happy to have joined the board and I look forward to making the best contribution that I can to the work that is so important. I wish that as we go along, we continue to ensure that a voice that is heard, a voice that contributes to devising solutions to the challenges that we face.”

Daniel Mminele is the former deputy governor of the Reserve Bank of South Africa, and currently serves as the head of the Presidential Climate Finance Task Team. He joined the Salzburg Global board in 2021 and participated in his first session as part of the Finance Forum.

The 12th annual Salzburg Global Finance Forum kicked off with a panel, Carbon Pricing and Carbon Trading: Policy Considerations, examining the role of carbon as a new asset class and tracing what kind of growth trajectory it can plot, as a global carbon market expands.  

Fellows – new and returning – from around the world came together to the first in-person Forum since 2019, held just ahead of the 75th anniversary celebrations of the Salzburg Global Seminar. Broadly themed Shaping the Future of Finance: Carbon Markets and Pricing, Digital Money and Financial Regulation, the three-day program saw Fellows engage questions, discussions, and analysis of strategic challenges and emerging risks. 

In the context of the threats climate change poses to the social, political, and economic landscape of the world as we know it, the panel held a frank and robust discussion offering insights into how different parts of the world are playing their part in managing carbon, and what a just carbon world will look like.  

Moderated by Amelie Champsaur, partner at Cleary Gottlieb, the panel’s speakers included Martin Moloney, secretary general of The International Organization of Securities Commissions (IOSCO), William McDonnell, COO of The Integrity Council for The Voluntary Carbon Market, Kumi Kitamori, acting deputy environment director and head of green growth at the OECD, and Daniel Mminele, head of the Presidential Climate Finance Task Team in South Africa. 

“We looked at how to link markets across jurisdictions,” Martin told Salzburg Global after the panel, which focused its discussion around voluntary and compliance markets, carbon pricing instruments, and the specifics around carbon trade, including credits and allowances. 

“A lot of the market activity is a good sign, but further regulatory harmonization is needed and again on measurement and assessment of different allowances and credits, especially in the voluntary markets,” said Kumi.  

Honoring the Paris Agreement 

William McDonnell spoke to the importance of prioritizing frameworks set out in the Paris Agreement, emphasizing that the goals require “some disruptive change” globally. 

“There was a lot of consensus here that the world economy needs to transform rapidly,” William said after the panel. “And a lot of that is connected with reducing emissions very fast. And so we need to stay very focused on the role of the carbon markets to help accelerate that alongside helping to develop renewables.”  

For William, the most important thing is that in the medium term, markets accelerate reductions. And Kumi Kitamori agrees. “We don't have time to lose anymore. We have to really ramp up efforts and cut emissions in the next 7 to 8 years,” she said. “If we are to meet targets by 2030, that's less than a decade.”  

All panelists agreed that in conversations around compliance and voluntary markets, country-specific circumstances need to remain central. Despite climate change being universal, the roles and stakes of developing countries vary greatly from those in the Global North. 

“Our purpose is helping the voluntary carbon markets accelerate a just transition to 1.5 degrees. And the just transition includes these concepts of helping to finance climate action that's needed in the Global South,” emphasized William. 

A just transition 

Speaking from the context of an “energy-precarious” country, Daniel Mminele highlighted the example of how South Africa – highly reliant on coal for electricity, a resource that is in high demand, with the country facing rolling power cuts dubbed “load-shedding” – faces an energy crisis, but is still an active player in a discussion about energy transitions.  

“The African continent is a very low contributor to global emissions, but finds itself now on the receiving end of very strict prescripts and policies that are right in reducing emissions, but that need to take into account our starting point that are actually the culprits for where we are sit elsewhere, and that they have used fossil intensive development to get to the levels of prosperity that they enjoy,” he said.  

At COP26 in November 2021, an agreement called the Just Energy Transition Partnership (JETP) was established for countries such as France, Germany, the United Kingdom and United States. The aim is to mobilize an initial amount of $8.5 billion to support South Africa’s transition from coal to renewable energy sources.  “We understand as Africans, we want to contribute to the global good, but are saying that we need help and we need that support,” said Daniel. 

The richness of a discussion drawing from global perspectives from people working across the board left Fellows energized for an exciting Finance Forum, promising to impart knowledge of current, topical matters.  

“I think what was really good about this discussion was the combination of people who were in the room,” concluded Martin Moloney. “We had a number of experts in here on carbon markets, but we also had a lot of people who were really trying to come to grips with something that is new to them.”   

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

Embedded finance (EmFi) is two years old and yet also two millennia old. Embedding financial services into other products and services improves the user experience, generates data that can be used to manage risk (among other uses), reduces costs, and makes finance more inclusive.

The term “embedded finance” was coined – or at least popularized – by venture capital investor Matthew Harris in 2019 to describe how technology has-enabled financial functions like payments, lending, and insurance to be woven into the fabric of any company, just as Internet and mobile connectivity have become ubiquitous parts of product offerings and business operations. Buy-now-pay-later (BNPL) offerings from a wide range of merchants, enabled by fintech companies, is one prominent example of EmFi. BNPL, as a product, is going mainstream with banks and established payments networks devising BNPL offerings.

But is there anything new under the sun? Since the dawn of commerce, individuals engaging in barter or monetary exchanges have agreed to take goods now and pay later: when I come by tomorrow, when the hog is slaughtered or the rice harvested, when payday comes around, or according to an agreed accounts payable schedule (also known as an “open account” transactions) offered to known counterparts.

What’s new is the ability for any seller to incorporate credit, payments, insurance, and other financial services easily into an existing workflow or customer experience. EmFi uses data to move beyond known and trusted counterparts and automates underwriting and processing to reduce the costs and risks. Thus, to continue the delayed payment example, “open account” type terms are being offered to a broader range of customers, including small retail purchasers.

EmFi models have increased, including:

• E-commerce platforms providing or enabling working capital lines to merchants selling on their websites (Amazon, Mercado Libre, Lazada, and Jumia);
• Logistics platforms offering per-ride insurance, vehicle finance, or advances against receivables for trips in progress (Grab and Kobo360);
• And wholesale order management and payment systems providing inventory finance or consignment sales of consumer goods stocked by small and micro-retailers (Amigo PAQ, AwanTunai, and N-Frnds).

The Appeal of EmFi

Across these and other applications, the attraction of EmFi stems from three inter-related features: incorporation into a core activity in which the customer is already engaged, leveraging data and automation, and expanding access.

Making finance part of another activity or workflow improves the user experience because no one actually wants most financial products for their own sake. For example, the individual wants a mortgage because of the home purchase; the business owner wants a working capital line to buy goods or pay salaries; insurance protects an asset. EmFi enables individuals to focus on the core functions of purchasing a home, ordering raw materials, or acquiring and using an asset without procuring funding or protection separately.

Leveraging data and automation enables EmFi providers to increase visibility to credit risk and recourse in the event of default. For example, a platform that is arranging cargo loads for a truck owner or enabling a small merchant to sell to a large customer base will know the borrower’s revenues and the quality of their business (returns and customer complaints) as well as the trends in the overall market. The platform can also deduct loan repayments from revenues at source, and borrowers who depend on the platform for access to their customers are likely to prioritize repayment to that creditor should they encounter financial distress.

Understanding the underlying transaction and use of funds and leveraging improved visibility and recourse enables EmFi to provide access to finance, and, crucially, to their own products, to a broader range of customers, including those without credit histories or even a prior trust relationship, depending on the application. BNPL, for example, enables any retailer to offer short-term credit like neighborhood merchants might give their “regulars,” driving increased sales volume and choice of higher-end products. Amazon is already a multi-billion-dollar lender to small businesses. In many emerging markets where working capital for small businesses is scarce, a credit line for sellers is a crucial driver of business volume and transaction fees for e-commerce platforms.

Together, these features potentially create intrinsic advantages for EmFi over third-party financial services, such as a bank loan.  EmFi can be more convenient for the customer, offered at a lower cost by the provider, and be less risky. As such, these models may present a competitive threat to banks and other traditional lenders. Incumbents’ responses to the rise of fintech BNPL offerings indicate that EmFi is indeed perceived as a competitive threat.

Those three-interrelated features also give rise to new regulatory challenges concerning whether and how the provision of financial services by non-financial companies should be regulated and supervised, how to safeguard data ownership and use, and how to bolster consumer protection. The economies of scale and scope evident in technology-driven business models have already created concerns about market concentration and potential abuses of dominant market positions. Embedding can carry existing dominance in data or customer networks into the adjacent financial services space. (1)

EmFi Business Models

Financial regulators will need to look carefully at the business models of EmFi. In some cases, tech platforms work with regulated payment service providers and banks that sit behind the scenes. In other cases, new entities take on intermediary roles outside the current regulatory perimeter or the remit of safeguards and consumer protections such as credit information systems.

The entry to financial services of new players via EmFi could present welcome competition to entrenched incumbents. There are examples of free or low-cost services enabled by the cross-subsidization an EmFi business model can incorporate. These may call into question longstanding financial stability and antitrust concepts such as the separation of banking and commerce and anti-tying provisions.

Most jurisdictions protect financial data, but we are still in the early stages of rolling out broader data protection frameworks. The increased linkage of non-financial information to financial services and access to finance should spur more urgent efforts in this area. In addition, coordination with other sector regulators and market conduct authorities will need to be enhanced to ensure data integrity, consumer protection, and fair competition.

Despite these challenges, regulators should look to welcome, rather than restrict, the flourishing of EmFi. As noted above, accounts payable finance has long been part of commerce, and by some estimates, the finance implicit in supply chains dwarfs global bank lending. Technology-enabled EmFi may disintermediate banks in some products but can also bring more transparency to the supply chain and other areas of finance, ultimately improving monetary and supervisory authorities’ ability to monitor and understand credit conditions.

The intrinsic cost and risk management advantages of EmFi should translate to lower risks and lower costs, if monopolistic abuses can be avoided. Furthermore, EmFi could improve stability and resilience at the systemic level as lenders with superior visibility and recourse – along with business motivations to provide capital – may be less likely to pull funding in a general downturn. They are also more likely to be confident to selectively re-start lending after a shock such as a global pandemic. (2)

EmFi is already a significant market force, and it will only grow as economic activities are increasingly digitized. Therefore, policymakers and market participants might consider:

• What conditions will ensure that EmFi improves economic resilience and financial inclusion?
• What steps can regulators take to encourage market growth and ensure fair and responsible EmFi?

Notes

1. For a discussion of market structure and regulatory issues, see “Fintech and the digital transformation of financial services: implications for market structure and public policy” BIS Papers No. 117, 13 July 2021 https://www.bis.org/publ/bppdf/bispap117.htm
2. For more on this, see the forthcoming World Development Report 2022, Finance for an Equitable Recovery.

Have an opinion?

We encourage our readers to share your comments by joining in the discussion on LinkedIn.

Matthew Saal is a digital finance specialist in the International Finance Corporation’s (IFC) Financial Institutions Group. Matthew joined IFC in 2016 and covers digital financial services and financial infrastructure advisory work, partnerships, and investments in innovative financial services providers. During 2018-2019 Matthew was a World Bank Presidential Fellow seconded to the Finance Competitiveness and Innovation Global Practice, focused on fintech policy and fintech for inclusion. Prior to joining IFC, Matthew was associate director in the local currency and capital markets development initiative of the European Bank for Reconstruction and Development (EBRD). Before joining EBRD in 2010, Matthew worked in emerging markets finance, private equity, venture capital, fintech strategy and business development, consulting, and international economics. Matthew holds an A.B. in chemistry from Princeton University and an M.Phil. in economics from Oxford University, where he studied as a Marshall Scholar.

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 Forum Director, Tatsiana Lintouskaya: tlintouskaya@salzburgglobal.org

Policy, data, sustainable futures, and risks – financial and otherwise – formed the basis of discussions as the annual Salzburg Global Finance Forum concluded its annual series with a two-day virtual program on June 21-22, 2021. Following on three shorter online programs held between April and June which considered various themes linked to Post-Pandemic Leadership for Financial Services, the online event centered on the topic Financial Services in the Post-Pandemic Era: An Opportunity for a Green and Digitally Enabled Recovery. 

“In this final program, we’ll examine the post-COVID world of finance, and we’re hoping to illuminate new risks and vulnerabilities that we face as we begin to come back from this horrible global plague,” said President and CEO of Salzburg Global Seminar, Stephen L. Salyer, in his welcome address. “We hope also to hear from all of you how industry leaders and policymakers can steer a course toward a more equitable, sustainable, digital future.”

Hosted by Salzburg Global in partnership with BBVA, Google Cloud, and JPMorgan Chase & Co., and sponsored by the European Banking Federation, Dynex Capital Inc. and Sherman & Sterling, the program saw several stakeholders from across the industries come together. Alongside co-chairs Shriti Vadera, chair of Prudential plc, and Tim Adams, the president and CEO of the Institute of International Finance, panelists and participants included senior and rising leaders from financial services firms, supervisory and regulatory authorities, public policy leaders, and professional service providers.

With evolving social, economic and geopolitical conditions coming into play, the pandemic has shone a light on the potential which overarching issues of global concern, such as climate change, have to fundamentally alter systems if they are not factored into current developments. These realities outlined the four panel discussions held over the two days. Discussants examined how policymakers and industry leaders are stepping up to new challenges, how climate action increasingly remains a question of geopolitical competition, and how financial services will be called upon to assume a leading role in providing the financial means for meeting sustainability goals.

In the first panel – “Financial Services Post-COVID: Addressing Emerging Risks” – discussants included governor of the Bank of England, Andrew Bailey; assistant managing director of capital markets at the Monetary Authority of Singapore Lim Tuang Lee; European Central Bank Supervisory Board member, Elizabeth McCaul; acting secretary general of International Organization of Securities Commissions (IOSCO), Tajinder Singh; and chairman of the board of directors at UBS, Axel Weber. The panel looked at the growing set of emerging risks in the financial sector, including climate-related risks, issues regarding non-bank financial intermediation, the effects of low interest rates, asset bubbles, and other repercussions of current massive government interventions

A second panel – “Towards a Sustainable Future in Finance: Global Landscape and the Roles of Private and Public Sectors” – intended to analyze the complexity of the global landscape behind the sustainable finance transition and elicit an open discussion on the scope of action for both the public and private sector towards a more sustainable future. Speakers were chair of the Impact Investing Institute, Elizabeth Corley, director-general for financial stability, financial services and capital markets union at the European Commission, John Berrigan; vice-chairman of BlackRock Asset Management, Philipp Hildebrand; chairman of BBVA Carlos Torres Vila; and former deputy governor of the South African Reserve Bank, Daniel Mminele.

Featuring Benoît Cœuré, keynote speaker and head of the Bank for International Settlements (BIS) Innovation Hub; Chris Brummer, professor of law and faculty director at Georgetown’s Institute of International Economic Law; Stefan Hoops, head of the Corporate Bank at Deutsche Bank; and Wendy Redshaw, chief digital information officer of retail banking digitech at NatWest Group, the third panel –  “Emerging Policy Challenges in the New Digital Economy” – focused on the main policy challenges that are emerging with the rapid digital transformation of the economy.

The fourth and final panel – “Financial Supervisory and Regulatory Policy Coordination: New Issues and Challenges” – looked at new challenges for regulators and supervisors in the context of new geopolitical issues confronting the financial services industry and featured Denis Beau, first deputy governor at the Banque de France; Jose Manuel Campa, chair of the European Banking Authority; Randy Quarles, vice chair for supervision on the board of governors at the Federal Reserve System and chair of the Financial Stability Board; and Carolyn Rogers, secretary general at the Basel Committee for Banking Supervision.

“We set out, despite the restrictions, to create a truly world-class program, focusing, as we always do, on the big questions facing the future of financial markets,” Salzburg Global Seminar Vice President and Chief Operating Officer Ben Glahn said in closing. “What this emphasizes to me is that, despite the restrictions on mobility, the restrictions on convening and travel, this kind of high-level, open, off-the-record exchange that the Salzburg Global Finance Forum has become known for can be replicated online effectively.”

Following on from the June 2021 program, a series of “virtual coffee breaks”, diving deeper into the discussions that arose. Rewiring The Financial System: Stablecoins, CBDCs and the Road to DeFi will take place on October 21, followed by The Mid- and Long-Term Macro-Economic Risks Post-COVID-19 on November 12. Registration is open to all participants of the June program.