Session: "Central banks, financial inclusion and digitalization: harnessing
technology for inclusive growth"
Conference "Financial integration and inclusive development: A view from the
Mediterranean Countries"/Banco de España e Instituto del Mediterráneo (IEMed)
Pablo Hernández de Cos
Governor
Good morning.
It is a privilege for me to chair this panel on the importance of financial inclusion and how
digitalisation can contribute to it. It's all the more a privilege given that the panel includes
governors from four countries with broad experience in promoting financial inclusion, where
significant initiatives in this area have been launched with the central bank taking the lead.
Access to financial services continues to be a primary problem globally. On the latest World
Bank estimates, almost 1.7 billion adults do not have access to an account offering basic
functionalities and, therefore, they are excluded from basic services such as payments,
credit and saving. This has obvious repercussions for economic and social development,
as there is a positive correlation both with growth and employment1, and it is thus essential
to understand the causes behind it. In this respect, most studies have highlighted the fact
that, although there may in specific cases be voluntary factors relating mainly to cultural or
religious aspects, the explanation for this lack of access to financial services is usually to
be found in involuntary factors. These include most notably a lack of funds for saving, cost,
distance from the nearest branch, a lack of education and the absence of the financial
infrastructures needed to improve the availability of financial services.
It is indeed here where new technologies can contribute decisively to overcoming or
lowering these barriers. Technology can reduce many fixed costs, traditionally associated
with the development of financial services, while providing for a greater adaptation of supply
on the basis of each society's idiosyncratic characteristics. Unsurprisingly, then, the
technological proposals linked to financial inclusion hail from different areas. We can find
them in traditional financial institutions, in the new fintech companies, in
telecommunications corporations and in the large technology consortiums known as
bigtech.
As to scope, one of the activities concentrating the bulk of the initiatives is payments. Thus,
in the past decade we have seen so-called mobile money - i.e. transactional services offered
mainly by mobile operators - become commonplace. Adding to these, more recently digital
wallet solutions have emerged with multiple functionalities and specific proposals for
international remittances. Aside from the progress in payment solutions, developments on
intermediation markets are providing for improvements in the financing of those groups with
a greater degree of financial exclusion, such as microenterprises and small agricultural
producers.
However, these developments are not spontaneous or uniform from one country to another.
The role of regulators and their policies are thus important, at least regarding two aspects:
the promotion of the use and development of technology, including the incorporation of
technological improvements into financial services provision; and the need to ensure that
headway in financial inclusion does not impair consumer safeguards or financial stability.
I would like to offer some brief thoughts on each of these two points.
Promoting the use and development of new technologies. Logically, developing
technological solutions requires suitable telecommunications infrastructures. They must
provide widespread access to the Internet, including in rural areas, while seeking to improve
digital education and offer safeguards against vulnerabilities such as cyber threats. We
should not forget that approximately two-thirds of the adult population without access to
banks do have a mobile phone. And, as the World Bank points out, these devices are
proving essential for improving accessibility to financial services.
Moreover, the development of a stable institutional framework - paving the way for
competition, providing legal security to the new financial proposals and ensuring an
appropriate level of interoperability - is vital for generating the necessary confidence in
financial services. Also, aspects such as legal recognition of digital identification, the use of
biometrics in identification and ease of access to public data in "Know your costumer" (KYC)
procedures, are matters the different tiers of government can push and which catalyse
significantly the progress in financial inclusion.
Monitoring the risks inherent in financial innovation. Along with the aforementioned risks
linked to cyber threats, financial innovation, in particular that aimed at the most vulnerable
population segments, can cause situations of over-indebtedness, market abuse and fraud.
This process must then be accompanied by financial education actions, the strengthening
of consumer safeguard measures and the development of data privacy policies. But we
should not lose sight of the speed at which these innovations develop. Such speed poses
difficulties for setting regulations in place since, on many occasions, their implementation
can only come about when the use of certain practices has become widespread on the
market. Hence, the use of formulas such as sandboxes or innovation hubs may help the
regulators act more nimbly while creating an environment in which innovators can better
anticipate regulatory trends.
Lastly, and before giving way to the panellists, the true protagonists of this debate, I would
mention the importance of international coordination and cooperation. Many of the
challenges surrounding financial inclusion and the use of new technologies are common to
all countries. This is why the role of organisations such as the IMF, with the Bali declaration,
and the Alliance for Financial Inclusion, with the Maya declaration, is pivotal to boosting the
use of new technologies in this field. We should also not forget the role that global
companies such as the bigtech can play. Indeed, financial inclusion is one of the essential
elements highlighted by Facebook in its proposal for a global means of payment, its
socalled Libra. In view of such initiatives, with a worldwide and immediate scope, you will
agree with me that international coordination is not an option but an obligation.