Digital finance & FinTech: Highlights from the AFI network (and 3 insights into 2019)

By Ghiyazuddin Mohammad (Senior Policy Manager, Digital Financial Services)

“The secret of success of humankind is large-scale flexible cooperation.”
– Prof Yuval Noah Harari

As a global policy leadership alliance, the AFI network thrives on close cooperation between member institutions from around the world to advance financial inclusion for the world’s unserved and underserved populations. Read on as we reflect on how the AFI network has progressed in espousing digital financial services (DFS) and FinTech for accelerating financial inclusion.

1. Policy frameworks on DFS interoperability & cross-border remittances

AFI released two policy frameworks in 2018 under the African Financial Inclusion Policy Initiative (AfPI), outlining best practices in DFS interoperability and cross-border remittances.

Drawing on years of experience, and in accordance with AFI’s strategy, the network is recommending policy and regulatory ‘benchmarks’ on financial inclusion topics central to its mandate.

Led by the AFI Digital Financial Services Working Group (DFSWG), more policy frameworks and knowledge products are in the works focused on cybersecurity, DFS and gender, e-money/agent banking and responsible digital credit.

2. The first peer review on regulatory sandbox approach

Given the rapid evolution of tech-based business model innovations, AFI member institutions realize that it is imperative to build institutional capacities to respond with appropriate policy/regulatory interventions.

The first peer review of a regulatory sandbox approach under the DFSWG was carried out in 2018 for Bank of Mozambique and conducted by members from Fiji, Sierra Leone and Russia and CGAP (stakeholder).

3. Building institutional capacity

Tech-based business model innovations are evolving rapidly, however, regulatory frameworks have not been keeping up the pace. As such, there is an urgent need to build institutional capacities to come up with appropriate interventions. Below are highlights from some of our capacity building initiatives:

• Peer Advisory Service (PAS) on FinTech for Financial Inclusion co-hosted by Bank Negara Malaysia (BNM). Peer advisory focused on innovative regulatory approaches, P2P regulations, equity crowdfunding regulations and e-KYC solutions. Advisory service included “clinic sessions” to help solve specific challenges submitted by members prior to the event and develop actionable plans for their jurisdictions.
• Member Training on Digital Financial Services co-hosted by Bank Al-Maghrib (BAM). The member training focused on developing strategies for enabling payment ecosystems. With its sophisticated payment systems and policy frameworks, Morocco showcased its leadership within the North and West African region.
• Pacific Regional Training on FinTech for Financial Inclusion co-hosted by Banco Centrale De Timor-Leste (BCTL).  Given many commonalities within the region, the training explored the possibility of a regional regulatory sandbox or test-and-learn approach. The first draft of the regional sandbox will be presented to the Pacific Governors at the next regional meeting in June 2019.

4. Influencing the global financial inclusion discourse

With more than 100 member institutions from 91 countries, AFI is well positioned to influence the national and global financial inclusion agenda.

• FinTech for Financial Inclusion Framework: Led by the DFS working group, the FinTech for Financial Inclusion Framework special report talks about having the support of infrastructure and an enabling policy/regulatory environment to advance financial inclusion via digital financial services.
• Sochi Accord on FinTech for Financial Inclusion: The Sochi Accord is ushering in a new era of Maya Declaration commitments and quantified targets that would allow AFI members to harness the potential of FinTech in their countries.
• 2018 AFI Global Policy Forum (GPF): Co-hosted by Bank of Russia, last year’s GPF themed, Innovation, Inclusion, Impact was attended by more than 600 participants from all over the world. The forum highlighted how innovative financial technologies — such as blockchain, biometric IDs, and cross-border remittances — hold promise to move the needle on financial inclusion.

What’s in store for 2019?

Now that you know how the AFI network has been leveraging on digital financial services (DFS) and FinTech for financial inclusion, here’s a glimpse into 2019:

1. Staying clear of the hype

The AFI network is staying clear of the hype and focusing on the relevance of FinTech for financial inclusion. From a policy perspective, we are extending the risk framework for FinTech that covers cybersecurity, consumer protection, data privacy and financial capability aspects. From a market perspective, we are making FinTech relevant to underserved communities including women, youth, forcibly displaced persons and the rural poor.

2. Initiating dialogue

This year, we are focusing on diversifying implementation activities specifically through country dialogue between developed and developing countries in 2019. Developed countries including Singapore, Luxembourg and the UK have led the pack in creating enabling FinTech ecosystems and related policy innovations. We also see incredible innovations that are relevant and contextual to their own regions — happening in the developing world with many of them being AFI member countries. The developed-developing country dialogue will be an appropriate platform for mutual learning, cross-pollination of FinTech innovations as well as policy/regulatory innovations.

3. Scaling cooperation

We are now increasing efforts to scale cooperation with broader stakeholders in the ecosystem. The basis for cooperation will be a shared belief in the transformative effect of FinTech in advancing financial inclusion and open/transparent exchange of innovative policy solutions.  

Stay tuned for more insights into the DFS and FinTech regulatory landscape this year!