A UN commissioned report ‘People’s Money: Harnessing Digitalisation to Finance a Sustainable Future’ concluded recently that the current digital disruption offers a historic opportunity to reshape finance. Achim Steiner, UNDP’s administrator and co-chair of the task force that prepared the report, explained its essence to Surojit Gupta:
How is digitalisation deepening financial inclusion?
Digitalisation enables better, cheaper and more financial services to be delivered to people, widely distributed spatially and with few financial resources. As the task force points out, digital helps to deliver the more than $5 trillion annually needed globally in loans to small businesses. Algorithmic analytics of payment data enables small businesses to secure loans more quickly, more cheaply and with no need to provide collateral.
What should governments and regulators do to fast track digitalisation?
Mainly they should adopt it themselves, making the collection and use of public finance more efficient, more effective and more accountable. The public sector accounts for almost 20% of global GDP and estimates of the digital dividend from efficiencies alone are estimated to be many hundreds of billions of dollars annually worldwide.
What should be done to bridge the digital divide in countries such as India?
There is much to be done, in India and also elsewhere. 750 million people worldwide have no access to the digital world because the infrastructure is simply absent, and we need to fix this now. However, a far greater number of people, more than 3 billion by some estimates, have coverage but no meaningful access, a matter of cost and also a lack of capabilities to take advantage of digital opportunities. Such capability gaps also lead to greater consumer fraud of all kinds, from the misuse of online identities to simple financial theft.
Where do you see the UN playing a role in raising awareness about digitalisation and also engaging various stakeholders?
The UN already does a great deal, from helping individual Member States build on their digital finance ecosystems and align them better with national priorities – a key recommendation of the task force – to building broader international consensus and action around key policy areas, such as through the ITU-led Broadband Commission. My own role as the UN’s Sherpa in the G20 Finance track also opens the possibility to bring greater recognition of the risks and opportunities of digitalisation to the world of financial governance.
What is the future of digitalisation and how do you see it gathering more momentum in the years ahead?
Predicting the future is a tricky business, but there is little doubt that digitalisation will increase in importance in years to come, accelerated of course by the fallout of today’s unprecedented Covid-19 crisis. The task force talks of an ‘historic opportunity’ to shape this development, now, when it is still immature, in formation. Today we can nudge the world’s digital trajectory in ways that accentuate its upsides and mitigate its risks, by stimulating certain kinds of market innovation, and advancing suitable governance arrangements.
Where do you see funding coming for building better digital infrastructure around the world? Public-private partnerships?
There are many ways this can be organised, through direct public funding, private investment and various hybrid arrangements. But the task force’s report is called ‘people’s money’ for a good reason, because it is grounded in the simple truth that all funding ultimately comes from us, the citizens around the world. The world’s financial assets and flows belong to us, as savers, consumers, investors and taxpayers. We need to demand that such funds are used to build digital infrastructure and other critical assets, holding markets and governments to account for making this happen, and enabling affordable access for all.
Countries such as India have seen a proliferation of startups in the area of fintech. What can the world learn from these startups? What about cross border collaborations?
Over a third of global venture capital went into fintechs in 2018, a sign of a vibrant, innovative ecosystem. Some will survive, a few may prove to be unicorns, and many others will be absorbed into larger financial institutions. From a development perspective, we need to nurture those that are harnessing digitalisation to increase financing aligned to the Sustainable Development Goals, the mandate of course of the task force. They may provide women market traders with their daily working capital needs, underpin large-scale carbon markets, enable pension policy holders to choose where their money is invested, and increase the accountability of public and private financial flows. We need tools to catalyse and support such fintechs, such as the one developed by one of the task force’s knowledge partners, a public-private partnership, the Green Digital Finance Alliance that can map in any country the alignment of digital finance ecosystems with the national policy priorities and the SDGs.
DISCLAIMER : Views expressed above are the author’s own.