Youth in rice farming, Philippines. Photo by Jayson Berto, 2016 CGAP Photo Contest Photo by Jayson Berto, 2016 CGAP Photo Contest

Policy

New technologies are rapidly changing the face of finance, breaking up financial services into smaller components digitally delivered by new players. Large retail chains, electronic money issuers and big technology and social media platforms such as WeChat, Apple Pay and Google are entering the financial arena, leveraging the vast amounts of data they harvest from consumers’ online purchases, text conversations or Facebook posts and combining them to deliver new financial services.

While these innovations offer great potential for expanding financial services to larger numbers of people especially the financially excluded, they raise new questions for policy making in an environment that was largely built for banks. Should the newcomers be regulated and supervised and by whom? What rules on market competition apply? How should data privacy be managed? Where is the balance between fostering innovation and protecting consumers? What risks are posed to market stability?

As financial services increasingly become modular, automated, disaggregated and transnational, CGAP believes that policy makers need a new approach. Successful financial inclusion requires a policy and regulatory framework that fosters responsible, inclusive financial systems and one that has the flexibility to adapt to rapid changes. Consumers must view the system as fair and stable, protecting their interests. Businesses must know there is a clear set of rules balancing innovation and stability while fostering appropriate competition and cooperation.

Latest Research

Publication

Open Banking: How to Design for Financial Inclusion

While many regulators in emerging and developing markets understand the potential benefits of open banking regimes, they are uncertain how to design them in ways that support financial inclusion. CGAP has identified 12 critical design components.
COVID-19 Briefing

Consumer Protection and COVID-19: Borrower Risks as Economies Reopen

Lockdowns have put consumers in financial need and providers under stress, setting the stage for consumer protection challenges to emerge around the provision of credit. In this Briefing, we offer preliminary recommendations for policy makers, regulators, and FSPs on how to keep borrower financial needs front and center without putting excessive stress on FSPs.
COVID-19 Briefing

Microfinance and COVID-19: Principles for Regulatory Response

As a result of the COVID-19 outbreak, further policy steps have proven necessary, both within and beyond the financial sector, to mitigate the impacts of the pandemic on businesses and ordinary people. This Briefing applies five guiding principle to country contexts, and specifically addresses what each principle means for regulatory responses to the COVID-19 crisis.

Latest Blogs

Blog

Some Countries Have Digital Bank Licenses, Others Have Digital Banks

Some regulators are creating custom banking licenses for digital banks. Others are licensing digital banks with existing licenses. What's the better way to encourage digital banking?
Blog

Data Privacy Concerns Influence Financial Behaviors in India, Kenya

For digital financial services providers looking for a competitive edge in developing economies, better data privacy features could be the answer, according to CGAP research from India and Kenya.
Blog

Yes, Financial Inclusion and Financial Stability Are Compatible Goals

At a time when policy makers are focused on the stability of the financial system, it is important not to lose sight of financial inclusion. In fact, evidence shows that the stability of a financial system depends, in part, on how inclusive it is.