IGF 2021 WS #29 Fintech: A sustainable development economy of inclusivity?

Time
Thursday, 9th December, 2021 (08:30 UTC) - Thursday, 9th December, 2021 (10:00 UTC)
Room
Conference Room 1+2

Organizer 1: Man Hei Connie Siu, The Chinese University of Hong Kong
Organizer 2: Martha Mai Hatch , City University of Hong Kong
Organizer 3: Leonie Kellerhof, London School of Economics

Speaker 1: Veronica STEFAN, Civil Society, Eastern European Group
Speaker 2: Nandini Chami, Civil Society, Asia-Pacific Group
Speaker 3: Agata Ferreira, Technical Community, Eastern European Group
Speaker 4: Olukayode Akanni, Civil Society, African Group

Moderator

Man Hei Connie Siu, Civil Society, Asia-Pacific Group

Online Moderator

Martha Mai Hatch , Civil Society, Asia-Pacific Group

Rapporteur

Leonie Kellerhof, Civil Society, Asia-Pacific Group

Format

Round Table - Circle - 90 Min

Policy Question(s)

Economic and social inclusion and sustainable development: What is the relationship between digital policy and development and the established international frameworks for social and economic inclusion set out in the Sustainable Development Goals and the Universal Declaration of Human Rights, and in treaties such as the International Covenant on Economic, Social and Cultural Rights, the Conventions on the Elimination of Discrimination against Women, on the Rights of the Child, and on the Rights of Persons with Disabilities? How do policy makers and other stakeholders effectively connect these global instruments and interpretations to national contexts?
Inclusion, rights and stakeholder roles and responsibilities: What are/should be the responsibilities of governments, businesses, the technical community, civil society, the academic and research sector and community-based actors with regard to digital inclusion and respect for human rights, and what is needed for them to fulfil these in an efficient and effective manner?

Financial technology (fintech) has become a popular catchphrase within the industry as an alternative to a sustainable development economy by alleviating the wealth gap. Some researchers have even gone as far as insisting that Fintech will be the precondition of any successful SDG strategy. However, existing studies have shown that rather than the proclaimed alleviation, fintech has often resulted in the further widening of the wealth gap. Much of these issues are rooted in digital and financial illiteracy. Fintech is an area embodied with limitless potential, how can we ensure the evolution of this realm is set on its path to a sustainable development economy? According to the United Nations, social exclusion describes a state in which individuals are unable to participate fully in economic, social, political, and cultural life, as well as the process leading to and sustaining such a state. Efforts in promoting inclusion are noted to be the driving force behind the development of the 17 sustainable development goals. With the exponential boom of technological development, a new field of exclusivity has risen: Digital Illiteracy. This illiteracy is noted to have a gender, geographical and ethnic division according to various reports. Studies have shown the interlinking relationship between digital financial literacy (DFI) and the wealth gap. This gap has led to the development of the DFI index by the international monetary fund (IMF) and other attempts in an effort to understand the underlying exclusions. As a result, it is important for policymakers and stakeholders to discuss the development of a framework in unifying the understanding of DFI in order to foster an inclusive digital economy for all. Cryptocurrency and blockchain technology have been controversial topics within governing sectors, as they are often titled “free from government control’. A report written by Dr Cathy Mulligan for the UN has suggested and identified blockchain’s inclusive and multilateral nature, which is in line with the UN’s sustainable development goals. This naturally leads to the question: how we can take advantage of this technology in the dimension of fintech, and what are the possibilities and drawbacks of developing an official global form of blockchain technology, an area that is under the investigation of the WorldBank and the UN? As noted, one of the major concerns of this workshop is the wealth gap rooted in the disparity of digital, financial literacy and its hybrid. Despite the increasing accessibility to financial services by digital technology, research has shown there is an existing gender, age and income group disparity of fintech users where it is often pointed towards the educational level and accessibility. What are some of the possible incentives to be adopted/ referenced when it comes to the promotion of digital literacy and accessibility? How could the digital financial literacy index developed by the IMF be utilized and serve as an indicator for policy-making and adoption? What are the hallmarks of good governance in relation to the development of digital financial inclusion could various stakeholders adopt? The goal of the workshop is to initiate conversations on the discussions of an important issue that is at work in the field of the digital economy. The workshop also aims to perform as an educational discussion, a myth-debunker and a gateway to a potential framework on fintech from the perspective of Internet governance, with digital financial inclusion in mind.

SDGs

5. Gender Equality
5.5
5.a
5.b
8. Decent Work and Economic Growth
8.10
8.2
8.3
10. Reduced Inequalities
10.2
10.5
10.6

Targets: Gender equality is closely linked to digital financial inclusion and literacy. With the deep-rooted digital gender gap due to varied and complex reasons, policies to achieve gender digital inclusion must be integrated across other initiatives related to a broad range of sectors, including the economy. With fintech being an up-and-coming phenomenon in the global economic sector, discussions and reforms in related policies and frameworks are necessary to further promote the inclusion of women and prevent a growing gender gap in other sectors due to the development of digital technology. In our workshop, we have also included a majority of female speakers from various regions to come together and discuss related issues. The concerns and discussions in this workshop are closely related to goals 5.5, 5.a and 5.b, and we aim to produce outcomes that could potentially benefit women’s engagement in the use of technology, ensuring that they are given equal rights to digital economic resources. Fintech is deemed as a solution towards achieving a more sustainable and inclusive development economy, with some research insisting fintech to be a precondition of any successful SDG strategy. In our workshop, we aim to explore fintech’s true ability in achieving higher levels of economic productivity with its technological upgrading and innovation with the use of technology, as well as look into current economy-related policies to discuss potential changes in frameworks and guidelines, which would promote the global and digital economy growth with technological innovation and startups. With the current digitalisation trend, fintech has also become a crucial part of a more convenient way to access financial services, and this workshop aims to discuss solutions towards expanding such digital access to financial services for all stakeholders, including banking and insurance resources. Therefore, this workshop is closely related to goals 8.2, 8.3 and 8.10, with the aim to promote a global sustained, inclusive and sustainable economic growth with the use of fintech. Inequalities are a prominent part of our concerns and discussions in this workshop, since various inequalities are involved when it comes to digital financial inclusion, the wealth gap, and the use of fintech, such as gender, age, geographical, political, and income, education level, and ethnic divisions. Via this session, we aim to discuss solutions that could include the voices of underrepresented groups, so as to empower and promote economic inclusion globally, irrespective of status and group. With fintech such as cryptocurrency and blockchain technology, controversies easily arise from their free of government control nature, as well as their current incapability to be inclusive and provide opportunities for different stakeholder groups. This workshop also aims to propose suggestions to improve the regulation and monitoring of fintech in the global financial markets and institutions, including ways to further improve the DFI index by the IMF, or set up guidelines for developing an official form of blockchain technology to be used worldwide. Goals 10.2, 10.5 and 10.6 are closely linked to the outcomes of this workshop, and we aim to suggest potential frameworks, guidelines and solutions towards reducing inequalities in fintech and economic inclusion.

Description:

The workshop aims to discuss the growing concerns and issues surrounding digital financial inclusion from the viewpoint of fintech in Internet Governance. Relevant stakeholders from different fields are brought together to educate, discuss, and suggest potential solutions and frameworks for fintech and digital financial inclusion, thereby leading towards a sustainable economy. This session is organised by youths, and will take the format of 1. Introduction (5 mins); 2. Speaker sharing (40 mins); 3. Round Table Discussion I (13 mins); 4. Summary I (2mins); 5. Round Table Discussion II (13 mins); 6. Summary II (2mins); 7. Open-floor Q&A (10 mins); 8. Conclusion (5 mins).

Expected Outcomes

After the workshop, a survey will be taken and polling results will be produced, serving as a means to supplement our final report. The contributions of participants are also taken into account, including their questions raised during the QnA session, as well as suggestions and opinions reflected via the survey regarding the concerns and discussions initiated during the session. A report on the results and findings from the workshop will also be produced, which will be published on the official IGF website for our participants and interested parties to reference to. The report will also be shared among respective Internet governance and relevant youth communities to spread awareness and share findings.

Both remote and onsite participation is welcomed and highly encouraged in this workshop. With remote participants, the onsite and online moderators will work together to ensure the smooth flow of online participation, such that the online community will have opportunities to engage in discussions and raise questions with an alternating pattern between onsite and remote participation. Online participants could input their questions into the QnA function of the video conferencing platform, and the online moderator would moderate the flow, providing online participants with the opportunity to have their questions answered by our speakers. Should all speakers and organizers be online, onsite participants are given equal opportunities to discuss and raise questions via the alternating pattern of engaging online and onsite participants. In addition, onsite participants may be given more time to interact with the speakers, since some speakers may answer questions from online participants by replying via the QnA function. We will be facilitating interaction between speakers and the participants in four main ways: (1) Speaker-to-speaker discussion: The moderator will be starting the round table discussions by asking the guiding questions, and the panel speakers are encouraged to contribute. The moderator will observe and balance the speaking time between the speakers through intervention. (E.g: The moderator will intervene in an appropriate manner when a speaker has spoken over proportionate and invite a speaker who has spoken less to provide more supplementation) (2) Speaker and audience discussion: At the end of each round table discussion, the moderator will open the floor to both the audience and the speakers to discuss the question posed by the moderator. The question is designed to be relatable to most general topic’s daily experience to encourage participation and understanding of the topic. (3) Q&A: There will be a Q&A session after the second round table discussion. The audience is encouraged and given the chance to ask any question in relation to the topic. (4) Survey: The survey will be conducted through Google forms. Interaction is encouraged in order to supplement our final report using audience contributions regarding the policy questions.

Online Participation

 

Usage of IGF Official Tool. Additional Tools proposed: Google Forms will be used to collect suggestions and opinions from the participants after the session.

 

Key Takeaways (* deadline 2 hours after session)

With recent increased regulatory activity, uncertainty to apply existing regulatory frameworks, wait-and-see approaches and prohibitive actions, all could deter innovating new financial technologies and services; while such varied agendas could disadvantage consumers through trial and error, this is a much-needed process to explore how rapid technological advancements in economies could be best adapted in societies to achieve the SDGs.

Call to Action (* deadline 2 hours after session)

Experimentation with technology, regulation and innovation in the financial economy is closely correlated, so it is crucial to promote the need and willingness amongst regulators, private technology sectors and other fintech-related stakeholders to explore different issues and ways under existing financial systems and regulatory frameworks, such that financial technologies could be better used to achieve the UN SDGs and promote digital inclusion.

Session Report (* deadline Monday 20 December) - click on the ? symbol for instructions

On December 9, the workshop “Fintech: A sustainable development economy of inclusivity?” was held at the Internet Governance Forum (IGF) 2021, with the session beginning with a speaker sharing, proceeded to a roundtable discussion with the speakers, and ended with a question-and-answer session by taking questions from participants both onsite in Katowice and online.  

The workshop has mentioned how fintech could be a crucial factor to improve financial systems for underserved populations, facilitating them to become more efficient and competitive. However, problems could still surface, such as the widening of the digital divide with poor Internet access and lack of digital skills to use the technologies to their fullest capabilities.

An uprising favoured usage of the Internet is e-commerce and banking other than social media, with monetary transactions becoming increasingly popular among teenagers nowadays. However, as Miss Veronica Stefan has mentioned, some are still unwilling to connect to their credit cards with their phones and make purchases as they lack trust in technology. Enforcing laws would not be useful in this scenario with such lack of trust, hence the emphasis is required to be put on skills that are always mentioned but never acted on, alongside the investment of time and resources equally in the community to alleviate this critical problem in the development of financial technology.

In addition to connecting people, inclusion has to be ensured from the business side of things. Ms Nandini Chami has brought a case study to our attention, with how an account aggregator policy is being debated in India, which enables financial of small businesses. Previously, when small businesses apply for a loan from a financial institution, they had to provide bank statements, goods and services records, tax returns and annual results to prove their creditworthiness; and this entire process had to begin from square one with another bank should the loan be rejected. With the new policy, an account aggregator now acts as an intermediary between the business seeking a loan and the lender themselves via the facilitation of consensual data sharing. However, there could be a possibility of account aggregators to conduct customer profiling or market segmentation, causing civil society players in India to be sceptical about the potential effects on financial inclusion, since this would result in many businesses and individuals suffering all because of this intermediary.

Dr Agata Ferreira has revealed to participants the basis of the emergence of the United Nations Sustainable Development Goals (SDGs), in which they could be seen as a compromise proposition to balance between the rapid and limitless economic growth, as well as the imminent disaster due to exploitation of Earth resources. However, existing models of economic growth are being relied on to work our way towards achieving the SDGs, with a statement on how the world is still on a seemingly unsustainable trajectory and we do not think that we know how to get off this path, and an example introduced on the ambitious growth targets of SDGs with regard to fishing alongside voicing out for the protection of water ecosystems and fish biodiversity. With this in mind, ICT innovations could open new possibilities and has the potential to redesign current existing economic models to help with this dilemma.

One of such innovations could be blockchain, with its potential to enable financial inclusion. Immutable blockchain data records help provide traceability for financial transactions and financial assets; and the appropriate monitoring of financial records as well as early detection of errors or corrupt activities aid in addressing several shortcomings in the current financial systems and frameworks. Financial inclusion and trust are in turn promoted with the risk of corruption and chances of bribery minimised on the Internet, hence various parties could have financial processes amongst each other despite having little trust with blockchain’s core trust-inducing abilities to verify and authenticate identities and data transactions. Therefore, this shows that financial digital innovations have the potential to bring the unbanked and underbanked populations into financial services provision.

Moreover, as mentioned by Miss Veronica Stefan, the role of public policy intervention is important for people from developed countries to regain their trust in financial technologies. Hence, Dr Agata Ferreira has stated how fintech has caught many regulators off-guard with its rapid and revolutionary growth, hence a regulatory void is created as regulators are struggling to keep up with the pace of fintech development, alongside much uncertainty in applying existing regulatory frameworks to novel technologies, services and products. Actions have been taken by some regulators to stall for time to figure out what the appropriate frameworks or approaches could be, such as prohibiting some fintech-related activities, as well as discouraging further fintech innovations, all of which will gradually lead to varied regulatory responses to the same fintech innovation.

Finally, while fintech is a complicated topic and not fully understood yet by the world, with ICT innovations and appropriate regulatory approaches, there is a bright future ahead of fintech to enhance financial inclusion and attain a sustainable economy.