By Dr. Sonja Kelly, Global Head, Women’s World Banking Institute
Financial sector regulators have much to consider when it comes to women’s digital financial inclusion: How can we narrow the gender divide in access and use of services? How can we reduce fraud in an increasingly complex digital environment? How can we fix the digital financial capability gap between early and recent adopters of financial products? Are the payment rails sufficient for delivering emergency relief? Can we increase data-sharing among financial institutions? What can we do to limit cybersecurity risks? Are financial services helping our government to meet social goals? The list goes on.
As part of Women’s World Banking’s 2024 TechEquity program sponsored by Visa Foundation and jointly delivered with the Alliance for Innovative Regulation (AIR), we brought together tech experts and women regulators. On the tech expert side, we had representation from top tech institutions, financial institutions, risk assessment providers, and cryptocurrency companies: Moody’s, IBM, Circle, Microsoft, Intel, PayPal, BioCatch, and Global Digital Finance. On the regulator side, central banks and ministries of finance sent fast-rising women leaders to the program. When put into a room, it became clear that regulator concerns spanned the gamut of topics in an increasingly digital world, and input was welcome. Industry representatives were thrilled to have an opportunity to speak openly about their own concerns around an enabling environment for innovation.
This year, we heard at a range of distinct concerns that are driving regulation and policy in emerging markets:
Should we allow space in our market for non-incumbent players?
Fintechs started disrupting the traditional financial products more than a decade ago and haven’t stopped. New payment companies are creating attractive consumer-facing interfaces and gaining market share. Cryptocurrency is outlasting its reputation as just a “fad.” Many recent financial sector entrants claim they will usher in a new era of financial inclusion for women and for all. Forward-thinking regulators and policymakers are making space for these fresh perspectives, but the challenge of doing so without destabilizing incumbents or introducing unmanageable risk weighs heavily on the minds of regulators.
How do we connect legacy institutions with innovative technologies?
When constructed well, application programming interfaces (or APIs) connect large financial institutions with a series of third-party extensions, creating a space to share a limited amount of data and to offer more value to consumers. Making these connections safely, however, and with consumer data protection in mind is critically important to building the digital public infrastructure of the future.
How should we assess cybersecurity risk in a fast-moving digital space?
Nearly everyone in the world who has a digital footprint has had their data leaked. Cybersecurity risks are only evolving—not diminishing. Ensuring regulation allows for effective risk management and recourse is important to women consumers, especially those who are entering the financial system for the first time. What is at stake is trust in the financial system, as one bad player could destroy the reputation of all.
What about human risk? Where are the weakest human links in the supply chain and what can we do to support them?
As fantastic as technology is, it will always be in the hands of humans who make mistakes. Cybersecurity risks often come from well-meaning humans in the supply chain who fall prey to cyberattacks, resulting systemic risk. Education and training along with creative cybersecurity countermeasures that flag errant human decisions are new methods regulators can try to engage with as they consider human risk and error.
It seems like every country has a Central Bank Digital Currency (CBDC). Should we work on one too?
There are nearly two hundred pilots or deployments of central bank digital currencies around the world, and the fear of missing out (FOMO) is real among policymakers. However, learning from these experiments means acknowledging that while financial inclusion is a worthy goal of CBDCs, no CBDCs have yet achieved this goal. Women are less likely to own a personal technology device and more likely to be digitally illiterate, and these factors may challenge CBDC effectiveness for women.
If we don’t allow cloud use, we stifle innovation, but if we do allow it, we lose some control over data storage—is there a medium ground?
Data protection was something regulators were concerned about decades ago, and this concern has only grown with increased diversity of data storage facilities. Cloud is particularly concerning to regulators today, but countries that do not allow cloud storage are going to reduce their financial sector players’ capacity to the computing power they have on-site. Once they think of cloud storage as a given, regulators must turn their attention to regulating cloud and ensuring it safeguards consumer data and includes regular checks on its security.
Can we minimize the handicap of low digital financial capability among new financial services users as we push for increased access?
Regulators and policymakers in our program pointed out that people entering the financial system a decade ago engaged with substantially different technology than new financial services users engage with today. Late-adopters of financial services are more likely to be women. Given these challenges, regulators and policymakers are keenly aware of the risk of fraud, abuse, theft, and other challenges women are more likely to face.
Industry perspectives and responses to these questions are critically important to women’s financial inclusion. Working through how to approach risk, how to prepare consumers for today’s financial world, how to engage new and innovative players is important. Solving these issues can be the difference between a financial future which solves financial exclusion and one that perpetuates inequality.
As Women’s World Banking works to take these insights forward in our own advocacy, we are actively seeking industry partners who want to have influence in women’s financial inclusion through engaging with regulators who have the power to influence the direction of our world’s financial future. Reach out to me at sk@womensworldbanking.org if you want to be part of this important conversation!
