Lower- and middle-income countries (LICs and MIs) are significantly behind other jurisdictions in terms of the usage of digital payments to governments, according to a survey report released on Thursday by the World Bank and the International Monetary Fund (IMF).
LICs and MIs also lag other countries in the area of ability to access information from government sources, and the adoption of faster and innovative payment services, the report said.
Two-thirds of all surveyed jurisdictions recognise the potential of Fintech and either are working on or have a national strategy in place, which often focuses on improving consumer awareness and education, reviewing and amending the policy framework and improving institutional capacity to enable Fintech investment, innovation, and adoption.
Most jurisdictions, irrespective of income level, aim at achieving universal coverage with open and affordable access to core digital infrastructure services.
Ayodele Akinwunmi, head of research, FSDH Merchant Bank Limited, said one of the advantages of digital payment is transparency of transaction which authority can be used to track people’s wealth and financial flow.
On the basis of this, he said government can use the data to drive tax collection. This process has been very successful in Nigeria so far given the progress made in the digital banking and how the Federal Inland Revenue Service (FIRS) has deployed and grown tax revenue in the country in the last few years.
“On the other hand, my view is that many in poor countries may want to evade tax and thus do less of digital payment. It is therefore the responsibility of the government authorities to create systems and structures that encourage digital payment, to enjoy the advantages associated with it which include cost reduction, speed of execution and financial inclusion, while using it to drive tax collections and remittances,” Akinwunmi said.
A total volume of 557,083,712 transactions valued at N34.02trn were recorded in electronic payment channels in the Nigerian banking sector in the first quarter of 2019, according to the National Bureau of Statistics (NBS).
The World Bank/IMF report revealed that there are high expectations of the potential of Fintech to expand financial inclusion for households (84 percent), Micro Small and Medium Enterprises (73 percent), and reduce the urban-rural gap.
However, there is only a modest expectation on the potential of Fintech to address the gender gap. Over 60 percent of jurisdictions reported having incorporated Fintech in a National Financial Inclusion Strategy (NFIS), mostly in middle-income countries. The focus of NFIS centred around fostering adoption of Fintech (41 percent), encouraging digitisation of government processes (41 percent), and establishing a forum for public-private dialogue (33 percent).
The report also revealed that while awareness of cybersecurity risks is high across the membership and most jurisdictions have frameworks in place to protect the resilience of the financial system, gaps in mapping cyber risks are common, particularly among emerging markets and developing economies (EMDE).
Cyber risks in Fintech have been publicly identified and acknowledged as an emerging risk to the financial sector in a majority of jurisdictions, particularly among high-income economies (79 percent). Evidence from the survey suggests that only a third of jurisdictions have analysed IT interdependencies within the financial sector, or of concentration risks among big technology providers that could threaten infrastructure. While a high proportion (83 percent) of high-income respondents reports some monitoring of cyber risks related to third-party service providers, only half of lower-income jurisdictions have specified minimum requirements.
On crypto-assets, the report said most jurisdictions agree that crypto-assets present risks to investors but are not yet a threat to financial stability.