BIS General Manager Agustín Carstens stressed the benefits of financial inclusion and suggested how financial authorities might build on success by partnering with fintech. Carstens outlined how the BIS can help to foster international cooperation in this field.
Financial inclusion is the gateway to increased prosperity. Central banks play a key role simply by fulfilling their price and financial stability objectives. At the same time, innovation and technology are needed too. Because financial innovation can have adverse effects too, it must be guided as well as supported. Policymakers can help by providing adequate infrastructure. This takes the form of both hard infrastructure such as payment systems or clearing houses, and soft infrastructure consisting of rules, regulations and standards.
Policy initiatives should be coordinated across borders, especially in the case of innovations that matter for financial inclusion. Coordination is needed because both innovation and data flow across borders. Remittance services that take advantage of new distribution channels are a highly relevant example. Remittances are an important source of income, especially in emerging market economies. Moreover, as formal remittances are cheaper than informal ones, they provide a compelling reason for individuals to be financially included. A joint study on how digital technology can enhance cross-border payments was recently published by the Bank of England, the Bank of Canada, and the Monetary Authority of Singapore. Economies of scale are just one advantage of such applications.
The BIS is determined to contribute substantially in this area. BIS‘s new medium-term strategy, Innovation BIS 2025, embraces several initiatives that BIS hopes will deliver insights into technological developments for the financial system and help policymakers use them effectively.
Mr Carstens said: “The challenges posed by financial innovation show that we need to broaden our collective efforts and integrate data into policy considerations. Defining standards and deciding who should have access to data are important aspects to consider. Getting the answers right could lessen the scope for regulatory arbitrage and adverse spillovers, keep markets competitive, and channel more of the benefits of innovation towards financial inclusion. International cooperation is vital to ensure that technology reshapes financial intermediation for the better.“
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