Developing and developed country regulators shared practical experiences on harnessing the potential of financial technology (FinTech) to deepen financial inclusion at a virtual event jointly organized with Bank of Thailand (BOT) on 1-3 December.

Held as part of AFI’s developing-developing country dialogue (3D) platform, the knowledge Exchange Program-2 explored the current state of open banking, open application programming interface (API), electronic know your customer (e-KYC) and digital identification. Special focus was given to data privacy and protection, mitigating the impact and implementation of COVID-19 recovery measures.

Addressing participants via live feed, AFI Executive Director Dr. Alfred Hannig said that the ongoing pandemic had accelerated the pace of digitization, creating fresh opportunities to bolster support for vulnerable groups in formal financial systems.

“Given the digital transformation in countries represented by AFI member institutions, innovative digital financial services (DFS) solutions will be key to enhancing the usage and quality dimensions of financial inclusion,” Dr. Hannig told the more than 30 participants from AFI member institutions. Greater financial inclusion, he explained, provided regulators and policymakers with a key solution to mitigate the impact of COVID-19 and build sustainable recovery and resilience.

Citing the network’s wealth of expertise, he affirmed the importance of peer-to-peer learning platforms to reinforce the post-COVID-19 recovery phase and, in particular, to enhance the capacity of innovative and enabling policy environments for digital financial inclusion and FinTech ecosystems.

“AFI’s cooperation model has been at the forefront of responding to the crisis by supporting its members in designing and implementing high-impact tailored practical solutions to build recovery and resilience,” he said. Among such measures are AFI’s COVID-19 policy response dashboard, webinars, publications and in-country implementation efforts.

BOT Deputy Governor Ronadol Numnonda concurred with Dr. Hannig, adding that consistent efforts to promote digitization in Thailand had already yielded positive results.

In pre-recorded opening remarks, Numnonda said that investment in digital had allowed for economic stimulus package payments to be disbursed into electronic wallets. Reflecting a switch in consumer habits away from physical cash, he noted an 85 percent annual jump in electronic payments and fund transfers in May 2020, when the government and health authorities had encouraged physical distancing.

But to fully harness the potential of digital innovations, he said that cooperation was needed among a broad range of stakeholders to ensure effective implementation, regulatory oversight and prevent fragmentation. It would also help protect consumers, particularly the most vulnerable, against cybersecurity threats.

“Financial and digital literacy are crucial enablers in deepening financial inclusion even further,” he said, adding that this made “working closely together to engineer workable solutions” even more beneficial for all.

Member institutions from three continents gathered for the virtual event, including, Bangko Sentral ng Pilipinas (BSP), Bank Negara Malaysia (BNM), BOT, Central Bank of the Russian Federation, Mexico’s Comisión Nacional Bancaria y de Valores (CNBV), National Bank of Cambodia and People’s Bank of China. They engaged in dialogue and peer-to-peer learning with colleagues from Accelerate Estonia, European Banking Authority (EBA), Innovation for Poverty Action, Luxembourg’s Commission de Surveillance du Secteur Financier, Russian Electronic Money and Remittance Association and the Office of the UN Secretary-General’s Special Advocate for Inclusive Finance for Development.

Sharing details of the latest developments on open banking and open API within BOT’s jurisdiction was Thammarak Moenjak, director of financial institutions strategy department, who emphasized the importance of “efficient, secure and cost-effective data” to open banking, describing it as a “key engine of the central bank’s drive towards digital finance”.

Reflecting uncertain times, he noted that the central bank had promoted a more flexible approach to financial regulation through four guiding principles: customer centricity, no compromise on financial stability, no anti-competitive behavior, and market conduct and consumer protection.

Echoing this sentiment was BSP’s Melchor Plabasan, officer-in-charge of technology risk and supervision, who said that the central bank had “recognized the benefits of moving to an open finance framework”.

He added that BSP was “undertaking on policy initiatives to further promote sharing of information among new and incumbent third-party players” as part of efforts to encourage industry-wide buy-in.

As with BOT’s Moenjak, Plabasan urged regulators to be more adaptable in the face of new innovation, saying that “there will be new products and services, and we need to be ready”, adding that BSP had adopted a “test and learn” environment.

the Malaysian central bank had published e-KYC guidelines earlier this year aimed at accelerating and streamlining industry practices, Ian Lee Wei Xiung, BNM’s financial development and innovation department manager, explained.

“The future is expected to be more digital and lower ‘touch’ economy, and this is why we see e-KYC as a very important regulatory and industry development that we should aim to move towards,” he said. In terms of approaches, he added that BNM opted for being technology neutral to better focus on outcomes that prioritized safe and secure technology and digital onboarding of customers.

Also underscoring regulatory achievements was CNBV’s Mary Pily Loo, directorate-general for operational and technology risk, who said that developments in open banking in Mexico had been given a boost with the passing of a 2018 FinTech law. Despite this and other successes, she was cognizant of potential market risks including information leaks and limited technical capacities among stakeholders to maintain API and supervisory standards.

Growth in open banking was also noted among speakers from developed countries regulators. Two million customers had signed up to open banking in the UK, but more needs to be done to raise awareness of customers, Bank of England’s senior FinTech specialist, Irina Mnohoghitnei said.

Dr. Dirk Haubrich, EBA’s head of conduct for payments and consumers also spoke about the rising popularity of open banking in Europe, citing some 100,000 downloads per month of an EBA registry that contains information on authorized or registered payment and electronic money institutions. The registry aims to ensure transparency and high levels of consumer protection.

EBA was constantly monitoring and reacting to new developments, including by establishing an industry working group, Dr. Haubrich said adding that challenges remain – from divergent API models across European Union member states to frictions between banks and account information and payment initiation services.

Reminding participants of the broader goals was UNSGSA Policy Advisor David Symington, who spoke of the opportunities for financial inclusion to achieve Sustainable Development Goals, saying that “greater access to digital financial services is a key enabler for many Sustainable Development Goals.”

The event, the second in AFI’s Knowledge Exchange Program series, was partially funded with UK aid from the UK government. It stemmed from last year’s global dialogue on regulatory approaches for inclusive FinTech, held in Prague, Czech Republic, where enabling FinTech ecosystems were identified as a key area of priority in the global developing-developed country dialogue workstream.

The knowledge exchange is held under AFI’s 3D platform, a unique initiative to share and learn from the practical experiences, best practices and expert opinions between  AFI members and their peers in developed countries.