COVID-19 and Digitization of Financial Services: Problems and Prospects

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How the Crown crisis affected the digitalization of financial services

Digitization of financial services during and after the coronary crisis. Photo: Healthweekly.com

Experts at the International Monetary Fund called out the main problems and prospects of the digital financial services sector during the crisis period. According to him, despite the fact that the COVID-19 epidemic contributes to further digitization of financial services, it also creates difficulties for small industry players to develop and emphasizes unequal access to digital infrastructure. The representatives IMF noted Importance of taking several measures to ensure maximum levels of financial inclusion. More on this later in the article.

Digitalization and Financial Inclusion

Even before the epidemic, the transition to digital financial services has helped countries expand financial integration, benefiting many low-income households and small businesses that are typically limited in their access to traditional financial institutions, The IMF website states.

Experts compare the impact of the coronavirus epidemic on digitalisation with the SARS epidemic, which accelerated the introduction of digital payments and electronic commerce in China in 2003.

Representatives of the IMF emphasize the importance of the adoption by authorities of favorable measures for digitalization and further development of financial inclusion. An example is the experience of countries such as Ghana, Kenya, Kuwait, Liberia, Myanmar, Paraguay and Portugal, where the transition to digital financial services has been accelerated by low fees and high limits on mobile money transactions.

pay attention. In March 2020, the National Bank of Ukraine recommended that banks reduce tariffs for remote and non-cash services to encourage people to use them due to the quarantine introduced in the country.

In a new study, the IMF introduced the Digital Financial Integration Index, which measures progress in 52 emerging and developing economies. The obtained results suggest that from 2014 to 2017, digitization expanded access to financial services, where financial integration through traditional banking services was reduced.

Experts said that at the moment, Africa and Asia are leaders in the field of digital financial inclusion.

pay attention. In 2019, Audrey Ottewanger, director of the ECOMMPAY payment company for the Asia-Pacific region, said that over the past five years, advanced Asian countries have indeed determined the evolution of payment trends.

At the same time, IMF representatives report that the situation is uneven with the digitalization of financial services and depends on the country. In Africa, for example, Ghana, Kenya and Uganda occupy the leading position in the region. Digital financial services are more commonly used in countries in the Middle East and Latin America. In some countries, such as Chile and Panama, this may indicate a relatively high level of bank presence.

In most countries, digital payment services are being converted to digital lending as companies collect user data and develop new ways to analyze their credit.

Thus, it is noted that from 2015 to 2017, the amount of market borrowing doubled, which uses digital platforms for direct communication between lenders and borrowers. Its main centers are China, Great Britain and USA. At the same time, digital market lending is also expanding to other regions of the world such as Kenya and India.

How does financial inclusion affect the economy

Representatives of the International Monetary Fund, citing previous studies, said that expanding access to financial services is beneficial for countries and society. According to him, the expansion of the provision of traditional financial services for low income and small enterprises contributes to economic growth and reducing income inequality. IMF analysis suggests that digital financial integration is also associated with GDP growth.


International Monetary Fund

Digital Financial Services: Challenges for the Future

IMF experts believe that using the high potential of digital financial services to meet the COVID-19 epidemic depends on several factors, including:

1. Equal access to digital infrastructure. This refers to access to electricity, mobile communication and internet availability, a digital identifier.

2. Improvement in financial and digital literacy And avoid data bias.

pay attention. After the quarantine ban was implemented in Britain, some conspiracy theories began burning 5G towers, deciding that they were spreading coronoviruses. More than 20 towers from various mobile operators were victimized by Vandal’s actions – cases have been confirmed in Birmingham and Liverpool, with social networks Manchester, Watford and Rumford also writing about. However, not all towers belonged to the 5G network – some provided 3G and 4G communications.

3. Regulators are required to monitor changes in financial technology. This is necessary to ensure consumer and data security, cyber security and differentiation between users and countries.

4. It is necessary to ensure adequate level of competition in the field of financial technology. This will maximize the benefits of digital financial services.


International Monetary Fund

According to IMF representatives, during the epidemic, the upward trend in digitalization of financial services was maintained. However, to build existing societies and solve the problem of growing inequality after the current crisis, world and national leaders must bridge the digital divide between and within countries to benefit from digital financial services.

Experts maintain the right balance between implementing financial innovations and inadequate consumer protection, lack of financial and digital literacy, unequal access to digital infrastructure, disparities about data that require action at the national level, etc. Stressed the need for. The IMF noted the importance of money laundering through international agreements and mitigating cyber risks and solving the problem of information exchange, including antitrust laws.

Read:
How developing countries fight coronacrosis – IMF data
What Happens With Payoneer Customer Money: Breaking News and Tips for Users
Financial inclusion: how access to financial services contributes to economic growth

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