Rapid developments in frontier technologies can boost regulatory compliance and cut long-term costs but expose institutions to risks in data privacy and protection, participants highighted on March 29 during working group meetings in Nassau.

Speaking at the Consumer Empowerment and Market Conduct Working Group (CEMCWG) and Digital Financial Services Working Group (DFSWG), member institutions from the Alliance for Financial inclusion (AFI) welcomed the adoption of new technological innovations to enable easier access to financial products. At the same time, many stressed the need for greater regulation to protect consumers and maintain trust.

“Privacy of data, digital tools, regulatory finance (RegTech), supervisory technology (SupTech), financial technology (FinTech) are on the minds of regulators,” said Armenuhi Mkrtchyan, the chair of CEMCWG from the Central Bank of Armenia. “The challenges are enormous, but we are planning lots of deliverables and really hope that we will achieve a lot”.

Meanwhile, AFI Head of Policy Programs and Regional Initiatives Eliki Boletawa announced plans during the joint DFSWG-CEMCWG Initiatives session to publish a special report on privacy and data protection, citing a need to understand the issues at stake and build on outdated frameworks.

Costs associated with developing and maintaining FinTech technology, were emphasised by members from the National Bank of Rwanda (BNR) , as participants sought solutions to challenges such as insufficient skillsets in the job market, the high cost of implementing new technologies and the risk of institutions falling behind technology developments.

 “There’s a risk of falling behind this curve,” the co-founder of Hummingbird Fintech, Jo Ann Barefoot, told member institutions during a convergence session on RegTech for consumer protection.

“Technology is changing at an exponential rate. Regulation is designed to be careful, cautious and risk averse and that makes it slow,” she said. “We have to move forward in face of this very, very difficult change. It’s loaded with risk and opportunity.”

Members were more optimistic about the new developments. “Regulators are aware of the issues,” said DFSWG Chair Clarissa Kudowor from Bank of Ghana. “There is passion to do something about it, and with that passion we can do great things.”

Participants were encouraged to consider the use of cloud technology and laboratory environments in order to learn about the regulatory needs to enhance protections. In other sessions, DFSWG members met to provide a peer review on the Central Bank of Egypt’s regulatory sandbox approach, as well as discuss the role of digital financial services (DFS) in helping communities build climate resilient approaches as well as reduce the financial inclusion gender gap. Meanwhile, CEMCWG conducted two peer reviews of the Royal Monetary Authority of Bhutan’s and Bank of Papua New Guinea’s draft guideline on financial consumer protection and deliberated on cybersecurity and gender policy frameworks.

Members were invited to join AFI’s pool of experts to facilitate in-country policy implementation. AFI Head of Policy Programs and Regional Initiatives Eliki Boletawa outlined that members could support in-country implementation through practical technical knowledge transfers for developing policies and regulations. They could provide their peers with in-house practical training on the use of policy tools for setting up implementation units and joint stakeholder training or engagement for implementing policies and regulations.

The co-host of 2019 Global Policy Forum, Bank of Rwanda Françoise Kagoyire and Bolitawa also took the opportunity to encourage participants to join AFI’s annual GPF, which will be held in the Rwandan capital of Kigali in September.

Members also elected new leadership teams, for DFSWG Nadezhda Prasolova of Bank of Russia was elected co-chair while CEMCWG appointed new subgroup leads in the areas of Financial Education for SMEs led by Madalitso Chamba of Bank of Malawi, Complaints Handling led by Moses Musantu of Bank of Zambia and Consumer Protections frameworks led by Susan Kabungaidze of Bank of Zimbabwe.  

In his closing remarks, CBOB Deputy Governor Derek Rolle thanked the event’s participants and congratulated its organisers and speakers. “We were so pleased to have been asked to host this event,” he said. “As all of you know, quite a lot of work goes into the planning and development, but it was worth it.”

Working groups are key to developing knowledge that can be turned into guidelines or knowledge products to help members in the implementation and development of policy regulations for financial inclusion. AFI has six working groups: CMEC, DFS, Financial Inclusion Data (FID), Financial Inclusion Strategy (FIS), Global Standards Proportionality (GPS) and Small Medium Enterprise Finance (SMEF). Each meets officially twice a year – at a standalone event and then ahead of the AFI Global Policy Forum (GPF) – but continue to develop outputs throughout the year.

About the Central Bank of The Bahamas (CBOB)

CBOB was established in 1974 to carry out independent monetary policy and financial sector supervisory functions in The Bahamas following political independence from Great Britain the previous year. Based in Nassau, CBOB joined AFI in April 2018, becoming an active participant of the Pacific Islands Regional Initiative (PIRI) by sharing its experiences and learning from those of other small island countries within the Alliance.

About Consumer Empowerment and Market Conduct (CEMC) Working Group

Launched in April 2011, the CEMC Working Group aims to support consumer empowerment and protection in order to help secure access to and improve the quality of financial services. Its prime objective is to develop and share a common understanding of lessons learned and cost-effective policy tools, and to promote their adoption at the national level as well as in a broader international context.

About Digital Financial Services (DFS) Working Group

With 60 member institutions, the DFS Working Group is AFI’s largest working group. It aims to promote digital financial services as a major driver of greater financial inclusion while also working with global Standard-Setting Bodies to represent the voice of developing and emerging countries. Furthermore, DFS encourages policymakers to exchange experiences in order to develop a shared understanding of the risks in emerging DFS business models.

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