Bridging the digital divide
- Purva Khera
While FinTech is definitely helping improve financial inclusion, it comes with the risk that it could also create new forms of financial exclusion. Because of the impact of COVID-19 – lockdown, social distancing – we’re already witnessing an acceleration in the usage of and access to digital financial services. As part of this, though, we’re likely to see an acceleration of the financial inclusion gap for people who might not have access to digital infrastructure – mobile phones and internet, for example.
In a lot of developing countries, it is often women who don’t have their own mobile phone or tend to share a mobile phone with their male partners. Moreover, women tend to have less access to the internet.
The other danger is around financial literacy – or rather the lack of it. We’ve found that, in countries where women have lower financial literacy than their male counterparts, the gender gaps in digital financial inclusion are larger. That is a huge risk and that is where the policymakers’ role comes in to ensure that this gap is closed over time, while digital financial services accelerate.
Through our research and conversations with FinTech companies across the globe, we learned that they’re attracting mainly smaller clients who might not have had easy access to traditional sources of financial services. But many of these FinTech companies have been put under enormous pressure as a result of the pandemic and may not survive into the future. This can have a knock-on effect on access to financial support for these smaller, more vulnerable customers and could set back inclusion.
In our conversations, regulatory uncertainty and the inability of regulators to keep up with the fast-paced technological changes were highlighted as some of the key constraints for FinTech companies to expand. This, in turn, affects their ability to extend their services to a wider demographic.
Finally, FinTech firms – especially in developing countries – are finding that there’s a real shortage of tech skills in terms of people who have the relevant knowledge and education (e.g. software developers, coders). This all plays a major role in limiting financial innovation and access to vital financial services for many. Policymakers need to step in to make sure these constraints are eased in the future, while ensuring high-quality supervision and regulation to support the safe use of innovative technologies.
Read more from Purva Khera in the ‘Inclusion gets personal’ article on pages 14-16 of the summer 2021 issue of Chartered Banker magazine.