How have financial systems adapted to COVID-19?
The Forum's Global Future Council on Financial and Monetary Systems has shared an analysis of how financial systems have rapidly adapted to the context of the COVID-19 pandemic, provided support for various stakeholders - and transformed as a result.
1. The growing focus on partnerships
- Partnerships between financial institutions and technology firms have accelerated access to funding and expanded access to products to previously underserved populations.
- More work is needed to fully realize the potential of partnership models across the ecosystem, including partnerships between industry and the public sector.
2. The evolution of fintech
- The fintech ecosystem has undergone a severe shake-up and certain trends are emerging: payment companies, for example, seem to be benefiting from the rapid adoption of digital payments, while digital banks have come under pressure.
- Fintech has also moved into the public sector arena and is being leveraged to develop public financial infrastructure that enhances areas such as the provision of social services.
3. The need for a global digital ID
- Current systems of data and identity are disconnected, incoherent and opaque.
- What is required is a system that is interoperable, apolitical, distributed and explainable - and one that grants individuals greater control over their information.
4. Accelerated trends and altered directions in digital payments
- The pandemic has caused an unprecedented shift in digital payments.
- The digitization of payments is not only providing benefits to consumers, it also presents immense opportunities for micro, small and medium enterprises.
5. Quantitative easing and inflating asset prices
- Asset values have become distorted.
- Market-derived pricing signals of the underlying health of the economy are being diluted and policy-makers must focus on redesigning tools that are again fit for purpose.
6. The transformation of regulatory capabilities and approaches
- Regulators must deepen cooperation and continue to focus on technology as both a tool to facilitate regulatory compliance and as a challenge that requires the strengthening of cyber- and data-security standards.
- The COVID-19 situation also highlighted once more the importance of limiting procyclicality in the financial system, and presents an opportunity to review remaining sources of cyclicality in regulation.
7. Implications for the financial services workforce
- Remote-work technologies and digital products have helped minimize potential disruptions, but have also raised challenges, particularly with regard to cybersecurity.
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