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How can fintech help governments with resilience?

How can fintech help governments with resilience?

Governments worldwide are increasingly turning to fintech solutions to help address challenges such as financial inclusion, economic recovery from the Covid-19 pandemic and climate change.

Governments in both the developed and developing world alike are working alongside the private sector to explore, procure and roll out fintech-enabled infrastructure, programmes and products to enable societies to move forward.

Global Government Fintech explores how governments are seeking to explore and encourage the use of fintech to meet economic or climate resilience goals, alongside the challenges faced.

Fintech, social payments and inclusion

In the developed world, for example, governments have turned to digital means to deliver social solidarity payments, a trend accelerated by the Covid-19 emergency.

Digital, too, is a growing priority in the developing world for authorities such as finance and tax ministries, as well as central banks. For example, Sri Lanka launched its first national inclusion strategy, with objectives including digitising government services and supporting fintech development, in March 2021.

Multilateral organisations and international agencies, too, are increasingly focused on encouraging digital financial services in the developing world.

The United Nations Capital Development Fund (UNCDF) – the UN’s capital investment agency for the world’s least developed countries – in June 2021, for example, announced a programme in Ethiopia in partnership  with the European Union and Organisation of Africa, Caribbean and Pacific States (OACPS) to help in particular women, young people and entrepreneurs hit by the effects of the pandemic. The UNCDF has also piloted a financial and digital literacy app in Rwanda.

Better Than Cash Alliance, which is a UN-housed partnership of governments, the private sector and international organisations, meanwhile has encouraged governments have been encouraged to ‘lead by example’ to ensure that most societies’ shift from cash towards digital payments takes place in a ‘responsible’ manner. The alliance has published nine ‘UN Principles for Responsible Digital Payments’ which, it states, demonstrate that ‘governments alone exert leverage over vital areas’. The principles include treating users fairly, prioritisation of women and providing user choice through interoperability.

An increasing number of fintech-supporting programmes have a gender focus. For example, ‘Reaching Financial Equality For Women’, a report published in March 2021 by organisations including UN agencies and World Bank, is built around a 10-point ‘action plan’ for governments and businesses to help economies and societies to recover from Covid-19. It aims to boost women’s digital financial inclusion and ultimately to ‘end the continued economic exclusion of half the world’s population and to build more resilient economies’.

‘Green fintech’ on the rise

Separately, as the climate emergency becomes more urgent and the world becomes more digital, fintech solutions are gaining traction.

Government-led initiatives illustrating this trend in the UK have included the Financial Conduct Authority’s (FCA) first ‘Green Fintech Challenge’ in 2019. Elsewhere in Europe, Switzerland’s government launched a ‘Green Fintech Network’ in 2020 to help it identify and decide how it can improve its support for the sector.

At a global level, green finance is one of six priorities in the Bank for International Settlements (BIS) Innovation Hub’s 2022 work programme.

Specific initiatives/ projects include: the BIS Innovation Hub and Banca d’Italia (Bank of Italy) running the ‘G20 TechSprint 2021’ to highlight the potential for technology to tackle challenges in green and sustainable finance; the ‘Monetary Authority of Singapore making ‘Harnessing Technology to Power Green Finance’ the theme of 2021’s ‘Global FinTech Hackcelerator’; and the BIS Innovation Hub and Hong Kong Monetary Authority (alongside private companies) completing two prototype blockchain platforms for green bond tokenisation in ‘Project Genesis’.

ESSENTIAL READING

Global Government Fintech’s dedicated Resilience section

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Global Government Fintech organised an international webinar entitled ‘How Can “Green Fintech” Help Tackle Climate Change? on 8 February 2022.