Today’s patterns do provide some indications of tomorrow’s possibilities.
The Task Force highlighted eight key barriers to digitalization of financing:
- Lack of basic access: 750 million people lack broadband connectivity, 1 billion lack formal IDs
- Capability gaps: illiteracy, poverty, social norms and lack of digital capabilities hinder uptake and usage, and reinforce inequality
- Access to appropriate digital financial services: lack of affordable, secure, relevant digital financial services
- Patchy data to support financial decision-making and digital financing innovation, particularly in relation to low income countries
- Siloed and non-interoperable IT systems hinder use of data to price risk, describe impacts and underpin accountability
- Talent shortage hinders digital financing innovation, particularly in less developed countries
- Weak regulatory capabilities undermine the establishment of enabling policy and regulatory environment for digital financing innovation
- Incumbent resistance to disruption, disintermediation, and digitally-enabled transparency of their activities and rewards
Today, for example, 750 million people remain without physical access to a mobile or broadband network. Poor ICT infrastructure in less developed countries are often compounded by economic, educational or energy access limitations. Challenges such as basic mobile device ownership or high service costs caused by market distortions continue to exclude the poor in digital finance, as does lack of education or consistent access to reliable energy sources. In low and middle-income countries, women are 23 percent less likely than men to use the internet. This gap is growing and is largest in the Least Developed Countries (LDCs). While it is likely that access to affordable internet connectivity will expand, deliberate efforts are needed to close gaps in inclusion, including the gender gap.
 “The advance of digitalization may be an inevitable aspect of this moment in human history. But its future pathways and impacts are by no means set in stone“ |
Nearly half (45 percent) of digital financial accounts created in the spirit of financial inclusion have not been used over the past year, due to barriers including usability, costs, safety and security concerns, relevance, skills gaps and societal norms. Women, rural residents, low-income people, especially in LDCs, remain disproportionately excluded. Women and girls are less likely to have the education, skills and confidence to participate in digital financing, largely due to poverty and cultural norms. The elderly, a growing segment of most populations, will face increasing challenges as the pace of technology-driven financial innovation accelerates.
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Digital finance is likely to come to all countries, and to be available to most people. Yet most countries will remain the recipients not the suppliers of such services. Shortages of entrepreneurial and tech talent, or a lack of resources to support their efforts, pose challenges for many countries, but will be most marked in less developed countries. Tech talent in particular is highly competitive. Women are systematically underrepresented in IT, finance, fintech, and in regulatory and policy making positions. An industry that intends to serve women but has no women in its leadership and technical positions will miss complementary perspectives and will likely fail to serve the entire population.
Policy makers and regulators in most countries also struggle to keep pace with the rapid evolution of digital finance, again notably in developing countries. Such gaps, if not overcome, at best cement dependency in those countries on the enterprises and regulatory norms of better endowed countries.
World Economic Forum: Reimagining Digital Identity: A Strategic Imperative (2020)
Alliance for Financial Inclusion: Fintech For Financial Inclusion: A Framework For Digital Financial Transformation (2018)
