MANILA, Philippines - Around 1.7 billion people worldwide have no access to the formal banking and financial system, with around half of them in Asia and the Pacific.
This financial exclusion has a variety of causes including people living in remote locations, lack of required identification or collateral, high fees, and services that do not match banking needs.
While financial technology, or fintech, can provide solutions to such challenges, it also brings some risks. Asian financial markets are increasingly interconnected both regionally and globally.
Digital technologies could bring new opportunities to provide financial services to that vast under-served population in Asia and the Pacific.
People need to be well-prepared for this wave of emerging technologies, but governments should also ensure appropriate policy efforts to counter potential risks, participants at the Asian Development Bank's (ADB) Asia Finance Forum heard on Wednesday.
"Technologies applied in the context of regulatory sandboxes for testing financial innovations, distributed ledger technology such as blockchain, establishing digital IDs through the use of biometrics, and so on have the potential to efficiently address long-standing obstacles and make real progress in expanding financial access," ADB Vice-President for Knowledge Management and Sustainable Development Bambang Susantono said Wednesday.
Fast digital technologies could accelerate the contagion from a negative event in a single country. As such, regulators and other financial authorities in Asia and the Pacific should cooperate and coordinate their oversight of fintech, the forum heard.
"We not only need to proactively search for ways to ensure the new technologies are financially inclusive, but we also need to ensure information security, data, consumer protection, and financial stability are at the center of preparation for digital financial services," Mr. Susantono added.
ADB has been supporting innovations in fintech in Asia and the Pacific. In Mindanao in the southern Philippines, ADB helped roll out a cloud-based banking pilot. The bank is working on a digital access tool through the use of a biometric ID system in Papua New Guinea to provide access to financial services for people without formal documentation. ADB has also implemented a weather index-based crop insurance pilot project using mobile banking services for over 9,500 small rice farmers in Bangladesh.
The forum, the third held by ADB, gathered around 500 participants from fintech innovators, technology companies, banks, regulators, and other experts to share expertise and lessons.