Barriers And Risks

Barriers and risks could restrict the realization of digital financing’s potential or further divorce finance from people’s needs. Physical exclusion is the most obvious barrier. There are still 750 million people who remain unserved by mobile data networks. A further 3.3 billion people lack adequate resources and capabilities to take advantage of the digital world. Women, youth and other disadvantaged groups are more reliant on unregulated informal financial services and have less access to economic opportunities. Resistance to digitally-enabled market entrants can restrict innovation which would reduce costs and enable more people to be reached. Governments can be unwilling or unable to improve targeting and transparency of public financing even where the technology makes it possible. Many developing countries struggle to make use of the power of data in driving better economic decision-making.
Quate

“This historic opportunity combined with this unprecedented crisis provides a unique moment and imperative to act in harnessing digitalization to accelerate financing of the SDGs.”

Digitalization opens new routes for embezzlement and fraud and provides ways to hide illicit financial flows. Cybersecurity threats increase. Biases in algorithms or underlying data sets may reproduce discrimination. Digitalization  may increase short-termism in financial markets. Digitalization increases the likelihood of a new generation of highly concentrated financial markets because of its tendency to provide ever-increasing benefits to scale. It may reduce autonomous economic policy space through the loss of control over macroeconomic and monetary policy.Repurposing finance to serve citizens in supporting inclusive sustainable development requires smart and purposeful market and governance innovations. Digitalization can enable financial products to take better account of sustainable development risks and opportunities. Market actors, both existing and new, play a critical role in developing financial products that take the SDGs into account, both in terms of environmental and social risks and positive impacts that customers and users care about. Governance innovations will be needed to incentivize and, where necessary, require these developments, as well as mitigate risks from digitalization itself.

There is a short-lived window of opportunity to achieve systemic change. Catalysing major change becomes possible during critical junctures of disruption. The opportunity arises when historic circumstances converge to create the perfect storm upsetting the status quo and opening routes to create something better. Peoples’ actions, rather than technology or fate, determine the outcome of these moments. The nexus of finance, digitalization and the transition to an inclusive sustainable development is a case in point.

Failure to act would be a wasted opportunity and risk finance’s divergence from the needs of citizens for an inclusive, sustainable development. Acting with purpose and ambition, on the other hand, opens the possibility of overcoming barriers to securing financing for the SDGs, whilst mitigating risks associated with digitalization of finance.

Barriers and risks could restrict the realization of digital financing’s potential or further divorce finance from people’s needs. Physical exclusion is the most obvious barrier. There are still 750 million people who remain unserved by mobile data networks. A further 3.3 billion people lack adequate resources and capabilities to take advantage of the digital world. Women, youth and other disadvantaged groups are more reliant on unregulated informal financial services and have less access to economic opportunities. Resistance to digitally-enabled market entrants can restrict innovation which would reduce costs and enable more people to be reached. Governments can be unwilling or unable to improve targeting and transparency of public financing even where the technology makes it possible. Many developing countries struggle to make use of the power of data in driving better economic decision-making.
Quate

“This historic opportunity combined with this unprecedented crisis provides a unique moment and imperative to act in harnessing digitalization to accelerate financing of the SDGs.”

Digitalization opens new routes for embezzlement and fraud and provides ways to hide illicit financial flows. Cybersecurity threats increase. Biases in algorithms or underlying data sets may reproduce discrimination. Digitalization  may increase short-termism in financial markets. Digitalization increases the likelihood of a new generation of highly concentrated financial markets because of its tendency to provide ever-increasing benefits to scale. It may reduce autonomous economic policy space through the loss of control over macroeconomic and monetary policy.Repurposing finance to serve citizens in supporting inclusive sustainable development requires smart and purposeful market and governance innovations. Digitalization can enable financial products to take better account of sustainable development risks and opportunities. Market actors, both existing and new, play a critical role in developing financial products that take the SDGs into account, both in terms of environmental and social risks and positive impacts that customers and users care about. Governance innovations will be needed to incentivize and, where necessary, require these developments, as well as mitigate risks from digitalization itself.

There is a short-lived window of opportunity to achieve systemic change. Catalysing major change becomes possible during critical junctures of disruption. The opportunity arises when historic circumstances converge to create the perfect storm upsetting the status quo and opening routes to create something better. Peoples’ actions, rather than technology or fate, determine the outcome of these moments. The nexus of finance, digitalization and the transition to an inclusive sustainable development is a case in point.

Failure to act would be a wasted opportunity and risk finance’s divergence from the needs of citizens for an inclusive, sustainable development. Acting with purpose and ambition, on the other hand, opens the possibility of overcoming barriers to securing financing for the SDGs, whilst mitigating risks associated with digitalization of finance.