Abstract
The volume titled Fintech and COVID-19: Impacts, Challenges, and Policy Priorities for Asia comprising nine chapters and authored by several experts is the outcome of an Asian Development Bank institute jointly with the University of Cambridge, Judge Business School, to study the relevance of financial technology (fintech) during the COVID-19 pandemic. In this context, the digital divide and financial literacy have been addressed specifically in Asia and the Pacific region. The book also covered security issues and financial stability factors to address the risks of sustained growth.
The book is structured in two parts. Part 1 contains four chapters that emphasised on impact of fintech on the overall development of the economy during the COVID-19 pandemic. Fintech helped the economies to offset the macroeconomic losses to a great extent and focussed on gender-related financial inclusion concerns. Part II focussed on the policy inferences for the post-pandemic era and the role of fintech in strengthening financial inclusion to attain sustainable growth.
Chapter 1 gave the overall view of the book. Muhammad Ayub Khan Mehar in Chapter 2 examined the effect of fintech on trade in goods and services, shareholder wealth and economic growth. The data from 102 countries were used from World Development Indicators (World Bank, 2020, 2021). The COVID-19 pandemic affected GDP growth but it brought significant progress in e-commerce and electronic payments. The empirical results show that fintech played a very important role in the COVID crisis and even the result of 35 Asian economies also showed that fintech has significantly mitigated the GDP fall/losses. Similar results were obtained for trade in goods and services.
Eric Alexander Sugand in Chapter 3 focuses on Indonesia’s fintech market. Being the large potential market for financial technology, the author tried to examine the impact of large-scale social distancing due to the COVID-19 pandemic on the fintech market of Indonesia. The empirical results showed that fintech payments were resilient to the shocks from the pandemic and thus did not accelerate fintech’s development. The authors also discussed the policies which were formulated to help micro, small and medium-sized enterprises (MSMEs) during the pandemic. So future industries can support the economy of Indonesia to recover and accelerate financial inclusion by ensuring direct transfers to people and overcoming bureaucracy.
Chapter 4 focussed on the MSMEs which have been the hardest-hit segment during COVID-19 pandemic. By using the data of 216 manufacturing MSMEs of Bangladesh the impact of fintech and e-commerce, the results further proved that the presence of the digital platform made the recovery faster in maintaining business and firm production. So, favourable policies and guidelines on fintech are crucial for the provision of easy access to credit to the smaller firm to get out of the distress caused by the pandemic shocks or other natural hazards.
Chapter 5 described the role of female BC agents in enhancing financial inclusion and access to banking facilities in the rural sector during the COVID-19 pandemic. The data showed that banking agents especially women helped to bridge the gender divide in the rural sector by overcoming the social and cultural barriers which resulted in entrepreneurial activity and contributed to women’s empowerment. The chapter also covered structural and technical challenges in furthering financial inclusion and will need institutional support mechanisms to make BC model more sustainable.
Chapter 6 has provided anecdotes of the role of fintech in mitigating the impact of the coronavirus pandemic. Digital financial inclusion has the capability to enhance economic growth, lowering income inequalities and reduce the poverty. It has also provided a cushion of finance to small and medium scale enterprises (SMEs) and thus opened up the opportunity for a large section of the population. The challenges to financial inclusion are discussed such as the digital divide, security issues and financial literacy. The authors also discussed access to domestic credit and payments as the two important aspects of financial inclusion. The new index was developed to measure digital inclusion from a sample of 52 emerging economies before the COVID-19 crisis and was compared with traditional finance to measure the progress. To support the empirical analysis, the interview was conducted with the central bank, fintech companies and regulatory bodies around the world in two phases to understand the effect of the contagion COVID-19 on digital financial inclusion. Various factors such as digital infrastructure, financial literacy, customer identification and the supportive legal environment were discussed to accelerate digital financial inclusion. Further, the chapter explored the risks of fintech to financial inclusion and discussed various policies needed to address the issue.
Chapter 7 discussed the global financial crisis of 2008, regulatory transformation and emergence of technology as new opportunities to improve finance in the last decade. Further, in the coming years, the themes which will drive the role of finance revolve around four key areas, such as electronic payments, regulatory technology, market integrity and digital finance platforms where the digitalisation of finance is accelerating. The authors have also discussed various strategies that the central bank undertakes to promote sustainable development and balancing of opportunities and risks involved. The authors have mentioned some key areas such as data security, cyber security, data privacy and the emergence of financial institutions that will come across in the process of digital transformation, and if the risks are effectively mitigated it can create a wealth of opportunities. Developed infrastructure to support digital finance can act as a boon in the achievement of sustainable development goals and in building better and more resilient financial systems to address future crises.
Nydia Remolina in Chapter 8 talks about the challenges of maintaining financial stability and ensuring the smooth flow of credit in the economy during the outbreak of COVID-19. The author divides the chapter into three sections. The first section discussed the revolution of data in financial services which could bring a drastic change in banking and capital markets. The second section covered a comprehensive view of the data-driven initiatives that have evolved during COVID-19. The third section provides a speculative look at the future of data-driven finance in a post-pandemic world and how, despite its positive effects on the economy's recovery, it also poses hazards to consumer safety and financial strength. A post-pandemic financial industry revival will depend heavily on a proper balance of regulatory goals.
Chapter 9 discussed the challenges in financing faced by MSMEs which play a key role in employment opportunities and economic development of emerging countries. Jin-Chaun Duan focussed on the Association of Southeast Asian Nations (ASEAN) as by 2030 they will be the fourth largest economy in the world (Lee, 2018), and encouraging MSMEs through digital transformation will make a way ahead. The information asymmetry between lending institutions and MSMEs has always been a cause of concern. So, the policy objective should focus on developing an infrastructure that can enhance the credit history of the borrowers so that lenders can provide subsidised financial support. The chapter used an empirical approach based on the credit data of MSME, and the impact of the pandemic is also seen with the help of a portfolio created from four hypothetical banks working in six ASEAN countries.
To summarise, this volume embarks on an extensive analysis of the role of fintech in financial inclusion during COVID-19 and its support during the pandemic recovery. The empirical work of the authors has proved that the technology and finance by individuals. The analysis based on both primary- and secondary-level data adds significant value to the policies. The volume has also given the challenges of digital financial services to be faced in the future and formulating the appropriate policies to encourage financial revolutions and address the issues of cyber security. The book has further opened up the scope to study other magnitudes of financial inclusion such as insurance, savings and wealth management with the availability of data. This book will be a valuable resource to students, scholars, researchers, industry stakeholders and policymakers having an interest in Fintech, financial inclusion, sustainable development goals, etc. in enhancing their knowledge of the subject.