A new set of seven multi-stakeholder principles for an inclusive financial system have been proposed as a shared framework for all participants in financial services ecosystems.
The Principles are intended to provide the basis for consensus building with a growing number of new players in increasingly fragmented and decentralized financial services ecosystems.
Unveiling the principles on Wednesday in a report obtained by Sustainable Economy, the World Economic Forum (WEF), said the principles, which are essential for an inclusive outcome will require private-private and public-private collaboration to embed in the transforming financial system.
The principles characteristics are:
- Inclusive by design: reaching the maximum number of people and businesses with mainstream financial services and supporting specialized financial services to include the rest.
- Integrated system: providing the user with an integrated financial services experience through open standards and market-driven interoperability.
- Digitally led: expanding digital access as a leading channel for the delivery of financial services while maintaining robust physical access channels.
- Economically sustainable and commercially viable: balancing cost, affordability and quality and enabling inclusion as a commercial strategy beyond philanthropy.
- Informed by data: creating relevant financial solutions and maintaining security by using data responsibly
- Trusted: deepening trust in financial services through technology, transparency and consumer protection.
- Effectively regulated: enabling innovation and competition while maintaining stability, integrity and consumer protection.
In summary, the principles should inform financial products and services design, enabling technology design, and infrastructure planning and design. They are also intended to represent a view that governments might consider in pursuing regulations, supervisory practices and relevant public policy.
The principles are an initiative of the WEF’s EDISON Alliance and partners, including Barclays, GSMA, the United Nations Economic Commission for Africa (ECA), Vista Equity Partners, Western Union, and Mastercard.
This white paper was developed as a platform for partnership between governments, industries and people to advance digital inclusion as a foundation for achieving the UN Sustainable Development Goals (SDGs).
“While private sector-led, it is the result of a collaboration between financial inclusion industry leaders, governments and international organizations who came together to form The EDISON Alliance,” the report explained.
The alliance comes as major transformation in financial services ecosystems is triggering new models of collaboration, and calls for a co-creation effort based on a shared set of principles which, if implemented, would wire the financial system to produce financial inclusion.
The partners note that global COVID-19 pandemic has accelerated digitalization, bringing a qualitatively different world much closer, adding that the depth of the shift was most evident in countries that entered the crisis digitally ready, while also highlighting the plight of the digitally excluded.
“The lines between the physical and the digital in financial services are becoming increasingly blurred. The new set of principles integrates the physical and the digital, accepting digitalization as the default for the future.
Background for initiative
According to the EDISON Alliance, an open-ecosystem of change-makers, mobilizing joint effort and aligning priorities to enhance the case for digital investment, about 770 million people globally lack access to electricity and over 3.5 billion remain without access to the internet.
While 1.2 billion people have obtained access to a bank or mobile money account since 2011, there are still 1.7 billion individuals still without access. Also, about one billion people lack any foundational identity, and despite progress, formal financial systems continue to exclude many.
The white paper (principles) was developed as a platform for partnership between governments, industries and people to advance digital inclusion as a foundation for achieving the UN Sustainable Development Goals (SDGs).
As such, there is a need for an explicit systems approach to financial inclusion that was identified by the EDISON Alliance community, which led to the development of these principles.
And digital technology is seen to have the potential to close the financial inclusion gap by reducing the cost, distance and speed of offering financial services.
WEF admits that the Principles outlined in this document are not the first attempt at articulating a comprehensive framework for advancing financial inclusion including through digital means.
For instance, in 2016, the Bank for International Settlements (BIS) Committee on Payments and Market Infrastructures with the World Bank issued guidance on improving access to and usage of transaction accounts as part of the first report on Payment Aspects of Financial Inclusion (PAFI).
This guidance was adapted to the fintech era in a report issued in April 2020.
In 2016 also, the G20, an intergovernmental forum comprising 19 countries and the European Union (EU), issued its High-Level Principles for Digital Financial Inclusion.
Farther down in 2011, the Alliance for Financial Inclusion (AFI), a global network of policymakers, issued the Maya Declaration defining the network’s key commitments towards financial inclusion.