FinTech innovation through three existing policies: cloud computing,. API / open banking, and contracts for outsourcing.
FINTECHSTAGE INCLUSION FORUM SUMMARY REPORT Jakarta, 22-24 March 2017
Day 2:
FinTechStage Global Showcase for Financial Inclusion
Global Standards This is the call for regulators to accelerate international collaboration: by creating universal infrastructure, costs will lower for cross-border transactions. Financial regulations serve to overcome expensive barriers, like distance, agents, and transfer costs. The advantage of facilitating scale lies in the hands of regulators, who are recommended to play a convening and learning role, bringing together groups to share learnings and apply peer pressure to raise the level of competition, and when a viable model emerges, be ready to regulate this to scale. There is a follow-up responsibility to mediate diverse stakeholder groups on an ongoing basis to smoothen out competitive tensions.
“Governments, please speak more with each other: we need global standards for financial inclusion.”
Serving People Incumbent financial institutions are challenged for their relevance, or lack thereof, in meeting the needs of their customers. Examples of rising community financial needs put pressure on regulators to allow for alternative financial services which create regulatory ambiguity. The power of communities are driving innovation from the bottom-up. Additionally, financial services providers looking to incorporate customer data for ease of access to financial services face ethical ambiguity: an example is nude loans, which acquire nude selfies as loan collateral.
Case Study: Jordan A Participatory Approach Jordan led the example of regulators using a participatory approach: Regulators ought to employ a participatory approach alongside high level executive decision-makers in order to design a collective solution that is robust and goes beyond a single perspective. This drives financial inclusion at multiple levels, driving improvements in interoperability unifying standards and usage for public and private services.
Case Study: India Empowering with Open APIs India's move to a cashless society has triggered the set-up of the progressive IndiaStack, an open API platform serving 1.2 billion Indians. The platform decentralises the development of solutions, inviting developers to create products and services on top of a vast database of biometric identities. This aims to accelerate citizens' access to insurance, banking, healthcare and employment.
FinTech for Financial Inclusion There is strong consensus that FinTech is one of the driving forces for financial inclusion: we see the large issue of identity being addressed by mobile and blockchain technologies in their roles as creators of digital and economic identities, respectively. Technology plays a crucial role in improving quality of life, especially in the context of the financially excluded. The role of Regulators include: influencing through policy, taking a participatory approach, and become learning institutions; all of which facilitate and foster collaborative environments in which incumbent institutions and startups may thrive together. NGOs and VCs are important ecosystem players which drive social and capital flows and allow crossindustry initiatives to better serve the poor nationally and globally. What is lacking amongst national regulators is a “true digital national identity”, not merely a cosmetic digital agenda. One such example is India Stack, which puts the problems and creates a platform for millions of users to build solutions, serving 1.2 billion of India’s population. In this case, the merits of open API policies help to democratise the solutions for identity and KYC services amongst others. As for start ups, getting heard by the regulators requires persistence to move past a standing start: establishing credibility requires perseverance when no one is listening.
“Regulators should not start by licensing Fintech.”
Case Study: Tanzania Learning to Scale In Tanzania, regulators innovate learning from testing before implementing policy. Regulation serves the purpose of scaling successful solutions after a period of incubation. During this time, peer learning and pressure is applied by the industry as a whole to raise standards of capabilities and solutions.
Ecosystem Plays Financial Inclusion case studies confirm the need for ecosystem plays: no one person owns the Financial Inclusion agenda successfully. Driving Financial Inclusion requires every part of the ecosystem to play a contributing role. In the example of Singapore, Tanzania, Jordan and India, each of these collaborative plays involve similar agents for change, with different nuances: Singapore using regulation to foster autonomy to innovate amongst Financial Institutions and thus encouraging collaboration with startups; Tanzania regulators take a learning stance until the service model is ready to scale, playing the role of amplifier, and creating channels in the ecosystem for healthy competition and learning by mediating between multiple, diverse stakeholders; Jordan engage decision-makers across the industry to design policies which optimise the Financial Agenda for every participant; India on the other hand are putting the development of products and services directly in the hands of its people, crowdsourcing innovative solutions which keep up with the pace of regulatory and consumer changes for their population of 1.2 billion citizens.
A Regulator’s Roadmap
“Driving financial inclusion requires everyone’s participation.”
Key Ingredients Although initiatives vary from country to country, the common themes in effective Financial Inclusion agendas are: the investment in infrastructure, clear leadership from governments and thoughtful regulation which are participatory in nature, stakeholders embracing the culture for learning and change, and the necessity of designing a national digital identity as a means to drive access to financial services. At a supranational level, there is evident advantage for participants, especially governments, regulators, and policy-makers, who collaborate to create standards that minimise costs for institutions, startups, and other parties and work towards achieving their financial inclusion goals.
Case Study: Singapore Influence by Policy MAS, the central bank of Singapore, use a different approach: the regulator plays an influencing role, providing clear direction for FinTech innovation through three existing policies: cloud computing, API / open banking, and contracts for outsourcing. Incumbents are incentivised to collaborate with startups whilst the culture of permission-first is discouraged amongst institutions. Next up is an eKYC policy which provides standards aimed at reducing costs.
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