Ariadne Plaitakis, Deputy Director, Regulation, Policy, & Research, Gates Foundation

Financial inclusion isn’t just about having access to an account. It’s about having better-quality, better-priced services that low-income consumers need and want. These are direct results of competitive digital financial ecosystems, something regulators have the power to create and shape.

Many factors can stifle competition. Powerful players can monopolize the market, making it harder for new fintechs to enter and leading to limited product variety, price hikes, and poor customer service.

Outdated regulation and lack of infrastructure can also create competition barriers, making it difficult for new providers to join the market and compete.

Poor or no interoperability is another major hurdle to competition. If payment system providers cannot speak to one another or serve customers indiscriminately, customers become dependent on fewer providers, get worse product terms, and pay higher prices.

A lack of customer information on pricing and product terms also hampers consumers’ ability to make informed decisions. Even if there are multiple providers for them to choose from, vague or limited information sabotages choice. Information empowers customers to exercise real choice.

People often think that competition inhibitors like these are for competition authorities to solve. And that’s true in cases where there are complaints or specific anti-competitive conduct in a market that needs to be sanctioned. But financial sector regulators can also consider how their policies affect market competition.

By choosing to support more competitive licensing models, like tiered licensing, or by hosting regulatory sandboxes to allow for innovative types of licensing, regulators can play a big role in creating competitive markets that solve real financial needs.

This is what Phase V of our partnership with AFI is all about. Competition is a critical part of financial inclusion. It gives consumers more choice, better quality products, lower prices, and ultimately empowers them. We want to help regulators play a bigger role in how markets work so they can support pro-competitive economies and ecosystems that support financially inclusive societies.