The Banking Executive Magazine - July 2022 Issue

It is imperative to build on these op- timistic developments, especially in light of the current economic chal- lenges. To minimize development setbacks brought on by the ongoing volatility, it will be essential to in- crease people's access to finance, lower the cost of digital transactions, and route wage payments and social transfers through financial accounts. In a number of crucial areas, both the public and commercial sectors can help this transformation move for- ward. They must first establish a sup- portive operating and policy environment. For instance, providing system interoperability permits pay- ments across various financial insti- tutions and mobile money service providers. The mobile phone system is far more important to improving access to finance than the traditional banking system. Internet access that is both functional and inexpensive is a requirement for developing digital finance. Stable laws and consumer protections are also required to pro- mote ethical business practices that increase confidence in the financial system. Establishing digital identification sys- tems is necessary as well because one of the main reasons some adults continue to be denied access to fi- nancial services is a lack of a recog- nized identity. We are aware from the experiences of nations like India and the Philippines that government identification initiatives and financial inclusion programs can collaborate to provide formal identification doc- uments and bank accounts to hard- to-reach people. For instance, India was a pioneer in developing a user- friendly digital ID system that priori- tizes privacy and security. It should also be a top priority to en- courage the digitalization of pay- ments. 865 million account holders in emerging economies opened their first account at a bank or other finan- cial institution in order to get money from the government, according to the Global Findex data for 2021. Be- cause customers who received pay- ments into an account were more inclined to utilize their account to make payments and access other services, this benefited households directly and also contributed to the development of the digital financial ecosystem. Thus, digital payments made by governments provide as a base for building trustworthy social registers and locating gaps and over- laps. As digital payments become more widespread and less costly, many pri- vate businesses will be able to pay their workers and suppliers electron- ically – and should. The digital revo- lution offers a chance to increase formal-sector employment without making compliance excessively bur- densome. At a time of tighter govern- ment budget constraints, digital payments can help broaden the rev- enue base by reducing tax avoidance and evasion. Finally, policymakers will need to make additional efforts to include underserved groups. The gender gap in financial access has narrowed, but it still exists. Women, along with the poor, are more likely to lack a form of personal identification or a mobile phone, to live far from a bank branch, and to need support to open and use a financial account. Finan- cial-education programs, especially those that involve peer-to-peer learn- ing (such as through women’s self- help groups) are essential as well. The World Bank is firmly committed to expanding financial inclusion through digitalization. We will con- tinue to support countries as they en- hance mobile-phone networks, rework regulations to foster access to finance, adopt e-government plat- forms, and modernize social-protec- tion systems. For the many millions of people who still lack an account, we need to redouble our efforts and find creative ways to connect them to the financial system, build eco- nomic resilience, and reap the bene- fits of inclusion. the BANKING EXECUTIVE 22 ISSUE 163 JULY 2022