Digital finance becomes lifeline during COVID-19 crisis: UN report

A United Nations report launched Wednesday said that digital finance has become a lifeline during the crisis caused by the COVID-19 pandemic.

"The unprecedented social and economic crisis caused by the COVID-19 pandemic has put a spotlight on the role of digital finance in providing relief for millions around the world, supporting businesses and protecting jobs and livelihoods," read a report by the UN Secretary-General's Task Force on Digital Finance, launched by the UN chief Antonio Guterres.

While the pandemic demonstrates the immediate benefits of digital finance, the disruptive potential of digitalization in transforming finance is immense. Mobile payment technologies have transformed mobile phones into financial tools for more than a billion people, said the report.

The report highlights how billions of people around the world are responding to the COVID-19 pandemic using digital tools to work, spend and socialize. It argues there is an historic opportunity to harness digitalization in placing citizens, the ultimate owners of the world's financial resources, in control of finance to ensure that it meets their needs, today and in the future.

Centrally, the report spells out how digital finance can be harnessed in ways that empower citizens as tax-payers and investors in envisaging a digital transformation at scale that better aligns people's money with their needs, collectively expressed by the Sustainable Development Goals (SDGs).

The task force identifies five catalytic opportunities for harnessing digitalization in aligning financing with the SDGs. Together they cover much of global finance, including aligning the vast pools flowing through global capital markets with the SDGs, increasing the effectiveness and accountability of public finance that makes up a major part of the global economy, channeling digitally-aggregated domestic savings into long-term development finance, informing citizens how to link their consumer spending with the SDGs and accelerating the lifeblood financing for the employment and income-generating world of small and medium-sized businesses.

The task force's Action Agenda is a call to action to businesses, policy-makers and those governing finance to do what it takes to deliver on these opportunities. It spells out not only the "what" but also the "how": investments, new capabilities and governance innovations can get the job done.

The task force concludes that harnessing digitalization for the good is a choice, not an inevitability driven by technology. Its action agenda points to actions needed to overcome digital risks that, unmitigated, could deepen exclusion, discrimination and inequalities, and separate finance further from the needs of an inclusive, sustainable development.

Achim Steiner, administrator of UN Development Programme, and co-chair of the task force on digital finance said that "digital finance's dramatic potential for transformative impact is being revealed by the COVID-19 pandemic. Digital transfers enable governments to get support to people in need, crowdfunding platforms have mobilized funds for medical supplies and emergency relief, and algorithmic lending means small businesses have quicker access to funds."

"The speed of the recent spread of these technologies is astonishing, but progress is not automatic. For digitalization to be a true force for delivering on the Sustainable Development Goals, technological advances must combine with sound policy that empowers citizens and enables our financial system to meet the urgent investment challenges that must be overcome to build forward better," he said.

In an interview with Xinhua, the UN development chief said that "what we have found is that the pace of change and the new frontiers of technology are unfolding even faster than anyone had anticipated."

Speaking of how financial technology (fintech) in digital finance can broaden the scope for more inclusion, Steiner said by showing an example that the use of digital platforms over the recent years has enabled "hundreds of millions of" people in China, Bangladesh, India and Kenya interact with formal financial system "for the first time in their lives."

"This is not just a kind of initial trend, this is an exponential development that is going to reshape the financial system significantly," said Steiner.

The task force, led by Steiner, and made up of senior figures from the tech sector, financial institutions, governments, and UN bodies, was set up by the UN chief in 2018, to improve understanding of the benefits and risks of the fast-moving fintech and digital finance sectors.