AFI Global Fintech Dialogue on Open Finance: Innovations and Inclusion – Opening remarks by AFI Executive Director Dr. Alfred Hannig

26 October, 2021 in Luxembourg 

Ladies and Gentlemen, 

Hope you are keeping well.

A very warm welcome to AFI Global Fintech Dialogue on Open Finance – Innovations and Inclusion organized in collaboration with the Ministry of Foreign and European Affairs and Ministry of Finance of the Grand Duchy of Luxembourg. It is my immense pleasure to welcome delegates from the AFI network, our peers from developed countries, as well as other policymakers, and leaders to this global forum. 

Today, as I speak at the 2^nd Global FinTech Dialogue – 2021, I extend my appreciation to the Government of Luxembourg and Ministry of Foreign and European Affairs and Ministry of Finance for co-hosting this event. The two Ministries are also graciously hosting our Europe Representative Office, which opened doors exactly a year ago. Through its European Office, AFI has been able to provide unique added value through closer engagement with our members in Eastern Europe and Central Asia, and by strengthening peer exchange and technical cooperation between AFI members globally with policymakers and partners in Luxembourg and across broader Europe.

At this point, I must also acknowledge the leadership role played by Czech National Bank in conceptualizing the idea of a Global Fintech Dialogue, the first took place in Prague in 2019. Leaders from developed and developing economies gathered to discuss regulatory approaches for inclusive FinTech. The GFD in Prague was a great success. Through broad ranging discussions on Fintech, the Prague dialogue identified cybersecurity, digital financial literacy and enabling FinTech ecosystems as topics of priority and mutual convergence. The event led to cross-pollination of ideas and reaffirmed the need for systematic peer engagement on these topics for both developed and developing countries. 

Our journey towards building an inclusive technology-led financial services began at AFI’s Annual General Meeting (AGM) in Sochi on 5 September 2018, when members from the AFI network endorsed the Sochi Accord on Inclusive Fintech. Our objective has been to leverage innovative digital financial solutions that serve 1.7 billion unbanked people across the world. Since then, the Sochi Accord has provided overall guidance to AFI and its members on different segments of always evolving inclusive fintech.

We have made significant progress in our inclusive FinTech journey through the establishment of the Developing-Developed Dialogue (3D) platform under the aegis of the Sochi Accord. The 3D Platform acts as a neutral peer learning forum for fast evolving fintech world and other areas of mutual convergence and interest among AFI member countries and developed country partners.

I am sure you will agree that such global alliances are critical to enabling peer-learning and capacity building for our members to reap the benefits of emerging digital finance innovations such as open data ecosystems. It is also integral to achieving AFI’s strategic objective of providing guidance to member institutions on policies and regulations on financial inclusion.

Guided by this objective, the second edition of the Global Fintech Dialogue is designed as a learning event for convergence issues related to fintech ecosystems. Specifically, the dialogue and the ensuing member training will focus on Open Data and Open Finance both of which are important enablers for inclusive fintech ecosystems.

What makes Open Finance/Open Banking a convergence issue?

We are using a broad notion of financial inclusion across the AFI network. Financial inclusion is no longer just on access to finance, therefore not only about bringing unreached groups into access to formal financial services. Financial inclusion is increasinly about maintaining high levels of safe and sound financial access, with increasing usage and quality of financial services. Financial inclusion therefore also embraces important issues such as financial health and financial resilience, with the ultimate objective to ensure financial stability. This is exactly the point of global convergence among financial regulators.

With the rapid advances in digital financial technologies, countries around the world are exploring ways to strengthen their digital financial infrastructure. The open data ecosystem is one of such advancements that offers great potential to accelerate financial inclusion in emerging and developing economies and to improve the financial health of individuals in developed countries. Examples from some of the advanced economies show that financial data can be securely exchanged. Consumer data, if used in a mutually beneficial manner among customers and providers of financial services, holds in principal an immense potential in enabling access and improving the quality of financial services. This is why we see open finance as a convergence topic that needs to be addressed by both developing and developed economies.

According to a discussion paper by McKinsey (June 2021), the economic boost from the widespread adoption of open-data ecosystems in the European Union, the United Kingdom, and the United States could be as high as 1.5 percent of GDP by 2030. The paper also notes that emerging economies will benefit more than advanced economies as they tend to have lower levels of financial inclusion and less financial depth. A good example of that is India, for which a maximum increase in its GDP of 4 to 5 percent was forecasted. 

In developing and emerging markets, we believe that open data can prove to be a boon to women and MSMEs who, in most cases, have remained outside the purview of the formal financial system. By tapping into and using the data related to numerous, small-value transactions done by women and MSMEs, open data can offer improved access to financial services, greater user convenience, and more suitable product options.

Developing countries that have made strides in establishing an open data ecosystem have seen a phenomenal increase in high-volume, low-value payment transactions, which are the critical enablers of financial inclusion. By bringing all financial entities on a common data sharing architecture, these countries are beginning to see improved access, greater usage and better quality of financial services among the people. 

Both AFI member institutions and developed country partners have shown great eagerness to learn about inclusive open finance and other fintech innovations from each other. Developed countries have made tremendous progress in the field of Open Banking in the last decade. They can provide rich insights about the role of open banking in widening the financial services. The United Kingdom’s open banking initiatives and European Union’s open banking innovations linked to PSD2 (Payment System Directive 2) are some great examples to learn from.

Likewise, emerging economies and developing countries have, in the last few years, begun to innovate more broadly in the area of Open Finance. Mexico, Nigeria, and India, for instance, have been frontrunners in this regard. Innovations in these countries bring to the fore the increasing role of non-bank entities and fintechs in the delivery of financial services, and more specifically in achieving financial inclusion.

Open Finance is therefore an interesting topic of mutual convergence. This respect and need for mutual learning and experience sharing has once again encouraged us to organize this Global Fintech Dialogue on Open Data Ecosystems.

What are the conditions that need to be in place? Evidence shows that approaches to enable open finance ecosystems differ across countries and regions, depending on factors such as, existing legal and regulatory frameworks around fintech innovations, data protection, and information security; level of maturity of the broader fintech ecosystems etc. It is therefore important for member institutions to better understand the key imperatives that would enable open finance ecosystems in their own jurisdictions. I am confident that this dialogue and the ensuing training will bring out the nuanced aspects of Open Banking and Open Finance and provide key learnings to both developed and developing country regulators. We must also ensure that the solutions are relevant for broader group of countries within the AFI network and beyond.

At this point, I must share that AFI is also in the process of developing a Policy Framework on Open Finance. This Framework will act as a guide for Central Banks how to harness the power of shared data ecosystems and develop country-specific regulatory oversight. Going forward, we would like to see extended collaboration with policymakers from developed countries in this area. At the same time, we will continue to support our members in developing appropriate policy and regulatory frameworks for Open Finance.

I am confident that GFD 2021 will serve as a platform to steer policy dialogue ahead on why and how open, interoperable data ecosystems can be leveraged by regulators in both developing and developed economies to build efficient and inclusive financial services.

I want to also highlight that at the end of today’s event we will have a ceremonial signing of a Memorandum of Understanding with the European Bank for Reconstruction and Development (EBRD) to advance gender inclusive finance in several AFI member jurisdictions.  We are pleased by the evolution and the likeminded nature of the partnership with the EBRD and look forward to the cooperation ahead.

I must extend my sincere thanks to our members who have always inspired us to organize such high-level policy events. It has been a pleasure to engage with policymaking partners from developed countries. There is always some learning for us to take from them. 

Once again, I welcome you all to this Global Fintech Dialogue. 

All the best.