The World Bank has in a report revealed that digital financial services, powered by fintech, have the potential to lower costs by maximizing economies of scale, to increase the speed, security and transparency of transactions and to allow for more tailored financial services that serve the poor.
The World Bank report – Digital Financial Services – details a description of the tools of digital finance, the successful business models and policies for encouraging their growth.
Exploring the risks and challenges of new types of services and the legal and regulatory frameworks needed for confronting them. The World Bank report, finally includes country experiences with promoting the expansion of digital financial services and the obstacles along the way.
The report said “The current COVID-19 pandemic has amplified the urgency of utilizing fintech to keep financial systems functioning and keep people safe during this time of social distancing, falling demand, reduced input supply, tightening of credit conditions and rising uncertainty”.
It further added: “At the same time, these new technologies must be designed and implemented carefully to manage their risks, particularly for the poor and vulnerable, so as not to exacerbate the challenges posed by this crisis.
“There is also an urgent need for investment in the prerequisites for developing digital financial services, such mobile broadband infrastructure—including in remote areas—expansion of digital identification, and open application programming interfaces.
“These investments should be complemented with the relevant legal and regulatory frameworks that can allow most people to benefit from digital financial services and ensure a competitive ecosystem.”
The benefits of Fintech to governments is huge. It is helping them to quickly and securely reach people with cash transfers and other forms of financial assistance and reach businesses with emergency liquidity.
It is also giving people the chance to transfer funds—including cross border remittances—and to pay bills from their home, or in a market or store setting, with limited physical contact. But the potential is very huge than what has been achieved so far with it.
The Bretton Woods Institution has also said that the crisis by the coronavirus pandemic has brought out the benefits of digital financial services in many different ways and its importance in achieving the Sustainable Development Goals.