Digital Banking and Financial Inclusion in 2021

Digital transformation has opened up the financial services market to new types of vendors and business models with great disruptive potential. The banking sector was not spared. The changing landscape of the banking value chain has recently become a very important topic for new banks, challenging banks, public banking initiatives, and so on around the world. The future of the banking sector is uncertain, but hopefully bright.

With the prospect of reaching billions of new customers, banks and other non-banks have begun offering digital financial services to economically excluded and needy people, based on digital approaches they have been using for years to improve their access channels. already served by the formal financial sector. Digital financial services, including the use of mobile phones, have already been introduced in more than 80 countries, some of which are widespread.

As a result, millions of poor, disadvantaged, and disadvantaged former customers are shifting from cash transactions to formal financial services – payments, bank transfers, savings, credit, insurance, and even bonds – using a mobile phone or other digital technology to access them. Services. And the picture is changing rapidly with the advent of more and more new technologies.

Digital financial inclusion involves using low-cost digital resources to reach people who are currently excluded and in need of financial services, with a range of formal financial services tailored to their needs, at an affordable cost for the customers and sustainable for suppliers.

While years of experience with digital financial service providers often provide significant benefits, the specific risks provided by the new services are in part due to:

• the creation of non-financial companies with new technologies;

• new contractual relationships between financial institutions and third parties, including the use of agent networks and other outsourcing;

• different legal treatment for deposit-like products (compared to deposit);

• unknown and still unpredictable costs for inexperienced and vulnerable consumers; IS

• use of new types of data – and new uses of data – creating new privacy and data security problems.

The main components of digital financial inclusion are:

• Digital transaction platforms allow customers to make or receive payments and transfers and store electronic value using devices that send and receive transaction data and connect to a bank or non-bank capable of storing electronic value

• Devices used by customers can be digital devices (cell phones, etc.) that transmit information or tools (payment cards, etc.) connected to a digital device, such as a payment terminal.

• Retail agents who use a digital device connected to the communications infrastructure to send and receive transaction data, enabling customers to convert money into electronically stored value (“withdrawal”) and stored value for money (“registration “) to exchange).

• Banks and non-banks can offer additional financial services through the digital transaction platform for financially excluded subordinates and individuals – credit, savings, insurance, and even securities – who often rely on digital data for target customers and for risk management.

The benefits of digital financial inclusion for economically excluded and disadvantaged people include:

• access to formal financial services: payments, overpayments, savings, credit, insurance, securities, etc. Migration to account-based services increases over time and expands as customers become more familiar with a digital transaction platform. Government payments to individuals, such as contingent money transfers, that enable accounts with digital storage value can provide those who are financially excluded from the financial system.

• The generally lower costs of digital transaction platforms – for both the supplier and the customer – allow customers to perform local transactions is minimal and irregular quantities and better manage their overall irregular income and expenses.

• Additional financial services adapted to the client’s financial needs and circumstances are enabled through the payment, transfer, and storage of valuable services on the digital transaction platform itself and the data contained therein.

• reduces the risk of loss, theft, and other financial crimes caused by cash transactions, as well as the lower costs associated with cash transactions and the use of informal suppliers

• it can also promote economic empowerment by enabling the accumulation of assets and, especially for women, by increasing their economic participation

Digital financial inclusion also carries risks for many vulnerable and financially excluded customers who seize the opportunity, notably:

• New risks for customers due to unfamiliarity with products, services, and suppliers and the consequent vulnerability to exploitation and abuse.

• Risks associated with agents as a result of the offer of new service providers are not subject to the consumer protection provisions applicable to banks and other traditional financial institutions.

• Risks related to digital technology can lead to service disruption and loss of data, including payment instructions (for example, due to missing messages), as well as the risk of privacy or security breach due to digital transmission and data storage.

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