To say 2020 has been a challenging year is a massive understatement. The COVID-19 pandemic has quickly undermined development gains from recent decades and slowed growth in many Asian economies.
Yet, every crisis presents opportunities. One is the rapid advance in digital technology, which offers a way to recoup some of these gains and spur a strong economic revival once the pandemic has passed.
As we all know, the pandemic has accelerated the use of digital technology. Many of us have become adept at online video conferencing and other digital tools while working from home.
Pervasive restrictions on mobility and lockdowns have driven companies to shift their businesses and services online.
The use of digital technology and e-commerce has become the business norm.
Digital payment platforms have eased a transition from offline to online transactions—and their use has skyrocketed in many parts of the region. In the Philippines, for example, the leading mobile wallet company GCash saw a 700% year-to-year increase in transaction volume in June alone, and doubled its registered users in the first half of 2020.
Asia accounted for just under half of that, while the United States generated 22%, and the Euro area 11%. The use of digital financial services also increased consistently, with the rise in the use of digital platforms.
If promoted wisely, fintech solutions can help secure a sustainable and inclusive recovery from the pandemic.
Fintech applications through smartphone-enabled saving, crowd-funding, and security tokens can greatly enhance the efficiency of resource allocation and reduce transaction costs. They can also encourage efficient delivery of social goods and services.
For that to happen, we need to work together to close digital divides that deprive socially marginalized and vulnerable groups, including the poor, women, elderly, and rural communities, of the connectivity they need to join the digital economy and leverage fintech to promote inclusive growth. Recently ADB approved a $500 million loan in Indonesia to promote fintech-led financial inclusion for micro and small enterprises and marginalized groups.
Five actions private and public sectors can jointly take to realise fintech potential
Going forward, there are five actions private and public sectors can jointly take to realize fintech potential and help communities build back better from the pandemic.
1. Equitable access to digital financial infrastructure
Asia continues to see uneven development of basic digital infrastructure and varying degrees of digital readiness. Steps should be taken to expand investment in digital infrastructure and connectivity by expanding broadband internet access and coverage, and by improving the delivery of affordable mobile and broadband services.
Providing digital education and training will also unlock the ability of communities to capitalize on the spread of digital technologies.
2. An effective digital ecosystem to support the creation, diffusion, and scaling up of technology and innovation
Second, an effective digital ecosystem needs to be developed to support the creation, diffusion, and scaling up of technology and innovation.
The private sector will drive most innovation. However, in most countries, public policy continues to play an important role in forging critical links between financial and technology firms. A complementary, consistent, and multifaceted policy framework is needed to develop and nurture a digital ecosystem. This should include measures to ensure fair competition, lower barriers to entry, protect consumers, and promote data privacy.
3. To ensure the development of robust, secure, and sustainable digital ID systems
Third, in developing countries in Asia the lack of digital identification often blocks access to digital services, which require verifiable identities to use. Steps should be taken to ensure the development of robust, secure, and sustainable digital ID systems.
Progress is being made. In Papua New Guinea, ADB is helping develop a smart card using Near Field Communications technology to enable identity verification even in areas without electricity or internet.
4. Fintech offers new ways to catalyze sustainable development finance amid considerable development gaps.
Fintech platforms can be also used to increase savings and channel resources into publicly or privately funded investments.
Blockchain-based solutions and asset tokenization (which transforms tradable assets into a security token that digitally represents the asset ownership) are promising ways of addressing financing gaps and securing sustainable funding for infrastructure. Initiatives by entrepreneurs to develop and implement new fintech solutions should be supported by appropriate policies and regulations to develop viable business models that can reduce costs and meet investment needs.
Fifth, the increasing reliance on digital financial solutions risks spurring fraudulent and criminal activities that threaten data integrity and privacy.
5. Financial institutions need a holistic approach to fortify their cyber-defense and security.
This can be done by reducing risks and strengthening the ability to recover quickly after an attack through platforms to share intelligence on incidents, often in real-time. Governments also need to ensure their regulatory systems can adapt to the ever-evolving global digital landscape. International cooperation is essential to safeguard cybersecurity—given that there are no borders in cyberspace.
This tragic pandemic has highlighted the power of digital technology. We must harness this power to reinvigorate inclusive growth so that communities, especially in poor and remote areas, can survive this crisis and thrive beyond it.
This article was previously published in the The Jakarta Post.
Can the Subscription Economy Save Financial Services?
Going back to the pre-Covid “normal” is not an option for financial services. Fortunately, the rise of the subscription economy points towards frontiers of untapped growth for the sector.
As the world waits for mass vaccination to revive economic activity, general malaise has overtaken the financial services industry (FSI). And things will probably worsen before they get better: US banks are expected to suffer US$318 billion in net loan losses by the end of 2022, according to Deloitte.(more…)
Asia Pacific Banks shrug off commercial property risks for now
APAC commercial property prices were down around 3% on average in 2020, after a 1% rise in 2019. But the coronavirus-induced decline has been modest compared to past downturns, suggesting that the impact on banks’ commercial real estate loans will generally be much smaller this time.(more…)
Thai banks net profit stood at 146.2 billion baht in 2020
The Thai banking system remained resilient with high levels of capital fund, loan loss provision and liquidity to support economic recovery from the COVID-19 pandemic. according to latest Bot assessment.
Ms. Suwannee Jatsadasak, Senior Director, Bank of Thailand, reported on the Thai banking system’s performance in 2020 that the Thai banking system remained resilient with high levels of capital fund, loan loss provision and liquidity to support economic recovery from the COVID-19 pandemic.(more…)
Rapid growth in China post-COVID makes it ripe for investment
Being “first in and first out” of COVID-19, China is the only country among the G20 that is thought by...
Is remote leadership part of the new normal?
With 77% of adults reporting that they would be willing to learn new skills now, or completely retrain, to improve...
Supporting disadvantaged women key to achieving SDGs in ASEAN
The study, which holds a gender lens up to each of the SDGs of the 2030 Agenda, confirms that when...
EEC Expects 300-billion-baht Investment This Year
BANGKOK (NNT) – The Eastern Economic Corridor (EEC) has expected investment to triple to 300 billion baht this year as...
Commerce Ministry sets Thailand’s export growth target at 4% for 2021
BANGKOK (NNT) – Thailand has seen export growth of 0.35 percent in the first month of the year. The Commerce...
Has Covid-19 prompted the Belt and Road Initiative to go green?
– Covid-19 led to a slowdown in BRI projects– Chinese overseas investment dropped off in 2020– Government remains committed to the wide-ranging infrastructure...
Subscribe via Email
National6 days ago
Thailand to further ease COVID-19 restrictions
Business6 days ago
THAI airways to sell training center building to raise more funding
Economics3 days ago
1.7 million Thais without smartphones register for "Rao Chana" benefits
Health1 week ago
200,000 doses of COVID-19 vaccine Distributed to 13 Thai provinces