Acceso usuarios
Douglas W. Arner, Sijuade Animashaun, Yixiao Cai, Kuzi Charamba
This article examines how digital payment innovation and supporting initiatives, such as infrastructure and regulation, can foster micro, small, and medium enterprise (MSME) access to finance. This expanded access in turn supports broader sustainable development as reflected in the United Nations Sustainable Development Goals (SDGs). Achieving these goals requires thoughtful consideration and management of technological and a range of other risks and impacts across jurisdictions and governance levels.
Digital payment platforms serve as collectors, aggregators and (in some cases) providers of MSME financial and other data. This supports lending, low-cost agent-assisted financial transactions, financial products, and services by conventional banks, micro-finance institutions (MFIs), and non-bank financial institutions. Importantly, the data provided by these platforms can facilitate cash flow analysis and factoring (a form of alternative credit data) in which MSMEs use receivables as collateral (complementing other forms of collateral, such as real properties) to access finance within traditional lending institutions or elsewhere As consumer confidence in e-commerce platforms boosts the digital presence of MSMEs, new markets for MSMEs (particularly small retail shops, such as “mom-and-pop” stores providing last-mile services to unbanked and underserved segments in remote areas) emerges.
Yet, there have been increasing concerns among policymakers and regulators at national, regional, and international levels from the impacts of new entrants’ financial innovations evolving outside of regulatory parameters. The activities of these new entrants in some cases pose risks to financial stability and the realization of the SDGs.
These concerns became particularly pronounced during the COVID-19 pandemic, which exposed the limitations of traditional institutions and the inadequacy of their existing service delivery channels. While the pandemic negatively impacted global economic growth and widened inequality gaps, it accelerated the adoption of financial innovations and highlighted the importance of new private actors. Digitalization in response to the COVID-19 pandemic demonstrated the advantages of emerging technologies to sustainable development. For instance, governments in countries across the world leveraged contactless and other alternative payment solutions to distribute benefits to vulnerable groups, including in remote areas, which increased many policymakers’ focus on MSME access to finance and the importance of financial inclusion for resilience and crisis response and the central role of technology. This led to focus on efforts to improve access to financial services for vulnerable and underserved demographics. However, these developments and initiatives are also raising novel issues regarding consumer protection, financial stability, market integrity, and data protection among advanced and developing economies.
Governments should take progressive steps to encourage cooperation between public and private actors, which can drive sustainable development without jeopardizing national and international regulatory objectives. This requires improvements in regulatory approaches and policy strategies to digital payments and alignment of set goals to include MSMEs that are critical to sustainable job creation and last-mile financial services. The fact that digital payment systems and new entrants may lie outside of current regulatory parameters raises risks. This is partly due to the potential for digital exclusion: inadequate access by vulnerable groups to digital infrastructure, necessary for alternative payments and broader digital financial services.1 Therefore, policymakers should collaborate with key stakeholders to make immediate and coordinated efforts to promote safety and efficiency of payment systems that also support financial inclusion and sustainable development. Pertinent regulatory challenges include consumer protection, the disintermediation of traditional finance, concentration effects, contagion and reputation risks, market integrity, data protection, and financial stability.
Governments can encourage collaboration through focused initiatives to promote national payment systems that are interoperable across different payment service providers and platforms. Alternatively, an equally innovative step may include the consideration and development of government-backed digital payment infrastructure or instruments, such as central bank digital currencies (CBDCs), to complement and support increasing digitalization.
