WASHINGTON – Financial technology services, such as digital payments, are rapidly transforming the landscape of developing countries, while also contributing to a safer global financial system, experts said at a Brookings Institution panel Wednesday.
The Brookings Financial and Digital Inclusion Project, which evaluates the access to and usage of financial services in developing countries, ranked Kenya, South Africa and Brazil at the top of the 21 countries that were surveyed. The three countries stood out in their efforts to bring banking services directly to their citizens, according to a report published by the Brookings’ project this week.
“Clearly, technology is changing the global financial landscape,” said Loera Klapper, lead economist at the World Bank’s development research group.
Although financial technology services have been blended into the daily life of most Americans and the rest of the developed world, their widening usage by low-income households has only been a phenomenon for the last few years.
Klapper praised the Chinese government’s effort in rolling out digital payments – that is, the ability to pay bills online. This has enabled helped “over half a million mom-and-pop shops to operate as bank agents” by distributing money and taking deposits as a convenience to consumers, apart from the traditional banking bureaucracies.
“These digital payments are game changer,” Klapper said.
The widespread use of digital payments has significantly improved access to financial services in developing countries, demonstrating progress made toward what the professionals dub “financial inclusion.”
In South Africa, for instance, around 75 percent of adults had bank accounts and 5 percent used non-bank financial products as of 2014. And Kenya, which also ranked high in Brookings’ analysis, now embraces both banks and non-bank institutions, such as mobile operators, to offer financial services.
Broad economic growth and stability issues related to financial inclusion are helping the poor fulfill their economic and social potential, said Loretta Michaels, senior policy advisor for financial inclusion at the U.S. Treasury Department, during the Brookings discussion.
“Beside its economic implications, financial inclusion is also a high priority in line with another of Treasury’s high priorities, which is safeguarding the global financial system from abuse,” Michaels added.
She stressed that the immediate challenge for policy makers around the world is to provide structure for these financial services and make them traceable and accountable.
“The good news is that the importance of financial inclusion and the importance of digital financial inclusion are now broadly accepted around the world,” Michaels said.