Digital disbursement of payments and remittances, delivery of governmental relief or stimulus funding and healthcare applications for contact tracing have been the three most common uses of fintech support for global Covid-19 relief efforts.
This is among the findings of an extensive global study of how central banks and other financial regulators have responded to the pandemic in regulating and supervising fintech activities and other forms of digital financial services.
‘The Global Covid-19 FinTech Regulatory Rapid Assessment Study’, co-produced by the World Bank and the Cambridge Centre for Alternative Finance at the University of Cambridge Judge Business School, is presented as one of the largest empirical studies to date on the impact of Covid-19 on the regulation and supervision of fintech. Researchers surveyed 118 central banks and other financial regulatory authorities from 114 jurisdictions, with two-thirds of those surveyed from emerging market and developing economies.
Regulators observed ongoing support by fintechs to Covid-19 relief efforts in their jurisdictions, with the top five ‘use cases’ being: digital disbursement of payments and remittances (38 per cent); delivery of governmental relief and stimulus funding (28 per cent); healthcare applications for contact tracing (22 per cent); ensuring business continuity (17 per cent); and support for small- and medium-sized businesses (12 per cent).
‘Strong’ increase in fintech during pandemic
The study overall found that regulators are responding to the challenges of Covid-19 and increasing digitalisation of financial services by taking sector-wide and, to a lesser extent, fintech-specific regulatory measures, as well as accelerating the pace of regulatory innovation initiatives.
Regulators observed what the authors describe as ‘strong’ increases in the use or offering of many fintech products and services since the start of the pandemic, in particular digital payments and remittances (60 per cent of respondents reporting an increase), digital banks (22 per cent), and digital savings or deposits (19 per cent). Respondents in jurisdictions with more stringent Covid-19 containment and closure measures are more likely to have reported a surge in digital payments and remittances services.
Regulators recognise that fintech can play a role in supporting regulatory objectives in light of Covid-19. Fintech may be especially helpful in advancing regulatory objectives to support financial inclusion (70 per cent overall considered it supportive, and 81 per cent in emerging market and developing economies), market development (61 per cent overall) and promoting competition (47 per cent overall).
Cybersecurity risks on the increase
The 81-page report also details how the pandemic has brought many challenges in the regulatory field.
Respondents see rising risks in the fintech market concerning cybersecurity (78 per cent referencing as a ‘top three’ risk), operational risks (54 per cent), consumer protection (27 per cent) and fraud and scams (18 per cent). 90 per cent of surveyed regulators from advanced economies see cybersecurity as one of their top three increasing risks associated with fintech activities due to Covid-19.
Thirty-seven per cent of surveyed regulators have taken at least one regulatory measure specifically targeting fintech sectors or activities. The most salient measures, especially in emerging market and developing economies, were directed at digital payments and remittances (65 per cent of respondents in emerging market and developing economies), such as waiving transaction fees, partially or in whole, and raising transaction thresholds. Other measures included facilitating digital capital-raising and creating digital banking frameworks.
Eighty per cent of regulators felt that they have been resilient and adaptable in their response to the challenges of Covid-19, with just over half (54 per cent) regarding themselves as being ‘well prepared’.
The report, whose research took place between June and August, highlights how many respondents in Sub-Saharan Africa and Asia-Pacific cited experience from previous health crises such as Ebola and SARS as having informed and supported their operational preparedness and resilience in dealing with Covid-19.
The Monetary Authority of Singapore (MAS) is among the organisations featured in the report, which highlights ‘digitalisation and operational resilience’ grants that the authority has dispensed to encourage the adoption of new digital finance solutions; and how it has focused its annual innovation challenge – the ‘Global Fintech Hackcelerator’ – towards Covid-19 resilience and green finance (check out our story ‘Singapore grants non-banks access to e-payments infrastructure’ for further details on this).
Separately, a report entitled ‘Rethinking resilience: Ten priorities for governments’ has been released this week by the consultancy McKinsey. The report includes a look at government stimulus packages, citing innovative delivery mechanisms in countries including Peru, Kenya and India.