Over 70 staff from AFI member institutions in Africa participated in a training session on approaches to enhancing financial inclusion through digital financial services (DFS) in Maputo, Mozambique on 10-12 May. Co-organized by AFI and Mastercard, through the AFI Public-Private Dialogue (PPD) platform, the training provided participants with an overview of recent innovations and global trends.

The training started with a session that highlighted innovations in DFS and technological solutions tailored for financial services providers. While regulators welcome innovative financial services and products, risk mitigation is important as innovative financial service should not compromise financial stability or consumer confidence.

DFS is dynamic and evolving and regulators must be ahead of emerging challenges brought in by new entrants, associated risks, and disruptive services. The role of the capacity building initiative under AFI’s PPD platform was applauded for providing practical and hands on insights that help regulators address these emerging issues.

RegTech is an imperative enabler to enhance the capacity of regulators to supervise and monitor emerging DFS. They role of AFI technical partners in this regard, will provide important lessons for regulators to adopt such solutions and resonates with AFI’s RegTech, FinTech initiatives.

Some challenges highlighted by the regulators during the training sessions include identification and KYC. It is widely known that identification is a fundamental enabler for access to financial services. However, AFI members shared multiple examples of how existing challenges in the implementation of an effective identification system can result in the inefficiency of verification and data storage. Digital enabled identification provides an opportunity to address this.

The other challenge pointed out by financial regulators is the issuance of national identification documents, as this is beyond their mandate. Therefore, coordination with the national identification authorities is required to ensure financial inclusion for all. The private sector has taken the opportunity to address the challenge of identification and data storage through application of innovative technology  such as eKYC, biometric options and using big data analytics.

It is imperative that the compliance to AML-CFT should not impede proportionate KYC for financial inclusion. Though this is a much desired outcome, based on public objective of enhancing financial inclusion, regulators are challenged on the need to ensure that national financial systems are not compromised to fall short of international standard requirements on AML-CFT which might cause de-risking. For a country to have effective risk based approach for complying with AML-CFT requirements it is important that a national risk assessment is conducted to validate the proportionate KYC in practice.

In order to balance financial inclusion and stability, the participants highlighted the importance of forging appropriate incentives that would encourage the financial service provider to implement digital financial services that complement the challenges of data collection, data sharing and data protection.

Financial inclusion for specific groups such as forcibly displaced persons (FDPs) was also discussed. The FDPs pose a financial inclusion challenge, especially in the context of identification. Several AFI members are host to FDPs arising from conflict etc. and are therefore looking for effective solutions that will enhance access to financial services to the FDPs. AFI plans to address this challenge through providing informed policy solutions that enables regulators to create an enabling environment for access for FDPs.