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The Next Steps for International Cooperation in Fintech

Opening Remarks by Christine Lagarde, Managing Director, IMF G20 High Level Seminar “Our Future in the Digital Age” Fukuoka, Japan

June 8, 2019

As Prepared for Delivery

Distinguished guests, ladies and gentlemen — good afternoon! Minasan, konnichiwa!

I would like to thank Japan’s Financial Services Agency for the opportunity to participate in this session focused on the important topic of our future in the digital age.

Opportunities and Risks in Financial Innovation

It is appropriate that we are launching our discussion in Fukuoka. Why? Because Fukuoka is Japan’s start-up city. In each of the last three years more companies have been started in Fukuoka than nearly anywhere else in Japan.

And here in Japan — and in Asia more broadly — is where both the peril and promise of fintech have revealed themselves.

It is in Asia where innovations in digital payments and verification systems first became mainstream.

But it is also in Asia where we first saw the darker side of fintech, with concerns for consumer protection and privacy concerns bubbling to the surface years ago.

Asia, like the rest of the world, is facing a defining moment: How to manage the risks of fintech without suffocating innovation; how to keep up with rapid fintech innovation, while making sure consumers and investors feel secure in their investments.

Technology always has, and always will, spur innovation in finance. The question is whether these innovations will benefit all, or only a select few. If handled correctly, fintech can cut the cost of utilizing financial tools and enable millions to fulfill their aspirations of building a better life.

That is why I believe it is our shared responsibility to create a safe, sound, sustainable and inclusive financial system, protected from criminal abuse.

The Bali Fintech Agenda

How can the IMF help with such an enormous task? Last year, at the request of our membership, the IMF and the World Bank developed the Bali Fintech Agenda. This agenda identifies twelve priorities that countries and other international organizations should focus on in the fintech space.

We then surveyed our members about these elements and 96 countries participated.

Our findings will be released in a new joint IMF-World Bank paper coming later this month and this afternoon I would like to share with you a few highlights. A sneak peak, if you will.

First, countries overwhelmingly see fintech as transformative for financial inclusion. They recognize that inclusion plays a key role in promoting growth, opening access for poor and rural communities through lower costs, and facilitating women’s participation in the formal economy.

Indeed, as IMF research shows, fintech has helped to close the inclusion gender gap in some countries, but not everywhere.

Gaps in access to technology are one explanation, but even when access is equal, there appears to be lower usage by women. For example, in Egypt, Ethiopia, and India, men are 20 percentage points more likely than women to have their own phone; in Bangladesh, men are 22 percentage points more likely than women to have a mobile money account.

Women also tend to use digital services less than men, at least in some countries, possibly due to social norms, or issues related to affordability and financial literacy. That is why we believe increasing financial literacy can play a key role in generating higher gender participation in every economy.

Second, countries are asking for greater international cooperation in fintech:

· Nearly 80% mentioned cybersecurity as their most important priority;

· Around 60% listed anti-money laundering legal and regulatory frameworks;

· Another 40% cited payment systems including across borders.

I should note that these issues are already being discussed in the various international forums in which IMF staff participates, but countries want to see swifter progress.

For example, crypto-assets have been in use for several years, but even among the countries of the G20, there is no consensus on their regulatory treatment.

The same is true about another issue discussed in our review — market concentration.

A significant disruption to the financial landscape is likely to come from the big tech firms, who will use their enormous customer bases and deep pockets to offer financial products based on big data and artificial intelligence.

These developments hold out the promise of accelerating inclusion and modernizing financial markets, but raise, in addition to privacy issues, competition and market concentration concerns, both of which could lead to vulnerabilities in the financial system.

China’s technology industry is a prime example of this trade-off between benefits and challenges. Over the last five years, technology growth in China has been extremely successful and allowed millions of new entrants to benefit from access to financial products and the creation of high-quality jobs. But it has also led to two firms controlling more than 90% of the mobile payments market.

This presents a unique systemic challenge to financial stability and efficiency, and one I hope we can touch on during the G20, and address in a cooperative and consistent fashion


So, let me conclude. Everyone here, and many around the world, recognize that it is critical to continue the international dialogue on fintech. It is not as easy as it seems.

Integrating different national approaches to crypto-assets, non-bank fintech intermediaries, and the governance of data is crucial if we are to harness fintech’s potential to promote greater financial inclusion and development. Yet at the same time, we have to find a way to preserve financial stability and integrity, protect consumers, and increase financial literacy.

Here, we can draw inspiration from the famous Japanese proverb: Walk across the stone bridge only after you have tested its strength.

We will cross the bridge, together, into the fintech future. But we will only do so once we are confident that bridge is safe and secure.

Events like the one organized today are a critical part of this process. I congratulate our hosts and the Government of Japan for taking on this important initiative. The IMF is proud to be your partner.

Thank you very much. Domo Arigato!

IMF Communications Department


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