njuguna ndung ’ u : development of efficient and cost effective payment systems in kenya address by prof njuguna ndung ’ u, governor of the central bank of kenya, at the “ emerging payment systems technical capacity building workshop 2012 ”, kenya school of monetary studies, nairobi, 14 november 2012. * * * dr. eliawony kisanga ; executive secretary ; esaamlg ; ms. maria c. stephens ; senior technical adviser ; usaid ; representatives of usaid and us treasury ; representatives of central banks present ; distinguished guests and participants ; ladies and gentlemen : let me begin by extending a very warm welcome to all the workshop participants. to the participants who are drawn from beyond our borders, it is my sincere hope that your stay with us shall be enjoyable and that you will carry with you pleasant memories of kenya when you return to your respective countries. ladies and gentlemen : this workshop is about the development of efficient and cost effective payment systems. the workshop will offer the pertinent issues of financial integrity which completes the architecture of financial inclusion. the importance of financial inclusion is now critically clear. indeed, there has been mounting evidence that access to financial services is a tool to fight poverty sustainably. access to affordable and sustainable financial services enables the poor to save and accumulate capital for investment. this is important for generating self - employment opportunities, smooth consumption, reduce vulnerability to economic shocks, raise productivity, obtain higher returns on investments and ultimately improve the quality of their lives. however, approximately 2. 5 billion adults globally, representing over half of the world ’ s adult population, have no access to formal financial services to increase their incomes and improve their lives. among them, 1. 1 billion live on less than one dollar a day. these numbers are a representation of the great demand and need for increased access to income generating activities and to appropriate financial services for the large un - banked populace across the globe. this is particularly true of developing economies in africa, asia and latin america where nearly 90 % of the world ’ s unbanked adults reside. the expansion of financial inclusion has thus become a critical topic in development agendas for policy makers and regulators globally, with considerable energy and resources having been devoted towards its enhancement. the testament to this is the g20 global partnership for financial inclusion ( gpfi ) where non - g20 members participate. the central bank of kenya, and indeed kenya has been represented by the governor. at this point therefore, allow

. new issues stemming from financial innovation although there are many upsides of financial innovation, it also raises new issues and challenges for us. first and ironically, new information technologies have made sophisticated cyber - attacks possible. moreover, with the widespread use of the internet and smartphones for accessing financial services, financial networks are becoming increasingly " open. " accordingly, it is becoming much more important to take effective measures against cyber - attacks and maintain information security. second, financial authorities are extracting various information from the balance sheets of licensed financial institutions such as commercial banks. furthermore, the authorities use regulatory tools, such as capital requirements and liquidity standards, to impose constraints on these balance sheets in order to maintain financial stability. however, these measures may not be very effective for non - bank fintech firms, especially if they deal only with payment - related services, or if they match the supply and demand of funds without using their own balance sheet in their peer - to - peer, or p2p, lending. thus, financial authorities are facing new challenges in terms of obtaining information and maintaining financial stability. third, there are debates on whether and to what extent new types of transactions such as high - frequency trading and algorithm trading enabled by recent information technologies tend to increase market volatility. theoretically, if technological innovation makes transactions more efficient, it could also contribute to market efficiency by increasing liquidity, for example. nonetheless, in view of the recent developments in various countries, policymakers must develop a deeper understanding of the impact of these new transactions on financial markets. even though new technologies bring new challenges, it may not be wise to try to stop technological innovation. i believe that policymakers should try to maximize the benefits and minimize the negative sides of technological innovation. in some sense, technological innovation reflects the basic human nature of " intellectual adventure. " i believe that human beings are inherently curious and search for better ideas to resolve problems, and that they have a genuine desire to communicate and share such ideas with other people. thus, i do not think it is easy to suppress such human characteristics. i believe the reason why smartphones have instantly become popular worldwide is that they were originally designed to be " tools for communication, " thus satisfying a basic human desire. moreover, if new information technologies are truly advanced ones, we should be able to utilize them also for enhancing information security and maintaining people's trust in financial transactions. to ensure that people support financial innovation and fintech, it is also important to