Page 44 - Banking Finance June 2022

ARTICLE

The COVID-19 health crisis has created new opportunities b) Digital financial inclusion is associated with higher
for digital financial services to accelerate financial inclusion. GDP growth:
The health crisis led to the "Great Lockdown," as country Adoption of digital payments is significantly and
heads have opted for restrictive containment measures like positively associated with growth, consistent with the
lockdowns, quarantines, travel restrictions, and other social notion that fintech might contribute to growth. Fintech
distancing measures to bring the contagion of the virus could thus play an important role in mitigating the
under control. economic impact of the COVID-19 pandemic, and
support the recovery, as countries with higher digital
Fintech, including mobile money, can help people and firms financial inclusion will find it relatively easier to:
Ensure continued access to financial services,
to maintain and increase access to financial services during
including by maintaining credit flows to households
lockdowns and the reopening of businesses, given growing
and businesses while keeping people safe.
preference for cashless and contactless transactions to
mitigate the spread. Many countries have encouraged its Deliver government support effectively and
use by introducing measures to lower cost and increasing securely; and
the limits on transactions for digital transactions.
Support consumption, innovation, and hence
productivity through digital economy
These developments could help to accelerate the shift
developments.
towards digital financial services from traditional financial
services. For instance, the severe acute respiratory
c) Fintech is contributing toward closing gender gaps
syndrome (SARS) epidemic in 2003 accelerated China's
in financial inclusion :
launching of digital payments and e-commerce (World This is something which many initiatives couldn't do but
Economic Forum). fintech did its best as huge opportunities opened up to
women in the form of work from home (WFH), online
Many evidence depicts that fintech is already playing an classes, flexible timings, online credits/ loans and online
important role in mitigating the economic impact of the sales etc.
COVID-19, by facilitating targeted fiscal measures to be
deployed efficiently and quickly to their intended d) The safe development of digital financial inclusion
beneficiaries, even the unbanked. By reducing or eliminating rests on a combination of factors :
the need for physical interactions and the need for cash, Rapid financial inclusion without proper regulation and
fintech is helping governments to reach people quickly and financial literacy can lead to financial instability, as
securely. witnessed during the global financial crisis. Regulators
warned that cybersecurity risks or inappropriate lending
practices by under regulated institutions could
Impact and Implications of Digital
jeopardize trust in this context, consumer protection,
financial inclusion : digital identification, and financial/digital literacy were
a) Digital finance is increasing financial inclusion, even high on their agenda. Fintech companies highlighted the
where traditional financial inclusion is declining : supply of skilled labor for fintech companies and
Digital financial inclusion tends to fill a gap where the availability of digital financial infrastructure as major
traditional delivery of financial services is less present. constraints.
Many study reports says that in some countries fintech
lenders participate in the government schemes to e) Digital finance can create new risks to financial
support credit extension to SMEs, whereas in other inclusion:
countries many fintech firms are scaling down new Those risks stem from inequal access to digital
infrastructure, constraints to financial and digital
lending in response to weak demand and to focus on
literacy, and potential biases amplified by new data
preserving liquidity and managing credit risks.

44 | 2022 | JUNE | BANKING FINANCE