The digital transformation of financial services gives rise to a set of important policy issues regarding competition, regulatory perimeters and ensuring a level playing field. These developments have the potential to make markets more diverse, competitive, efficient, and inclusive, but could also increase concentration.
The COVID-19 pandemic has accelerated the digital transformation. Indeed, digital transformation, which is simply another term for the Fourth Industrial Revolution, is forcing a shift in business operations, systems and processes, and expanding the possibilities for improvements in output, productivity, efficiency and export competitiveness.
Financial technologies (Fintech) have improved access to financial accounts and are driving gains in productivity and investment. The technological revolution, dubbed The Fourth Industrial Revolution, has gained traffic in the corporate world by fundamentally changing the way many businesses interact with consumers. Through automation, intelligence, and personalization, technology has not just moved these industries forward, it has catapulted them. But although the financial services sector has used technology to upgrade its infrastructure, its move towards using the innovations unleashed by the Fourth Industrial Revolution to benefit consumers is still in its infancy.
Advances mean we are now living in a world where more people have access to a mobile phone than basic sanitation. This creates many new business opportunities. Yet at the same time, it poses a serious threat to companies that fail to adapt. The Fourth Industrial Revolution is disrupting and reshaping existing businesses, redefining the high street, and irreversibly changing the way business across all industries is conducted.
Fintech could better promote overall national economic performance as a platform industry. Because most businesses within the fintech industry depend on innovation through the integration of finance and information technology, i find that fintech can feasibly prompt the fourth industrial revolution. FinTech has ushered by the fourth industrial revolution is a broad phenomenon that is evolving daily as more technology entrepreneurs enter the industry and transform it according to social needs. On one hand, FinTech could be considered a financial service, which is intervened by innovative technologies to satisfy the requirements of tomorrow, high efficiency, cost reduction, business process improvement, rapidity, flexibility, and innovation.
Today’s banking and financial sector is facing an unprecedented change wherein various new players are entering the market and disrupting the traditional modes of operation. This disruption not only opens doors for completely different business opportunities but also poses challenges to the existing set up of business. This industry is characterized by excessive regulations in Namibia, indicating the need for negative regulation for new, innovative businesses within the fintech industry that would critically emphasize innovativeness for inclusive, sustainable economic growth.
Fintech can be the solution that helps transform the Namibia’s financial systems by adapting financing tools which reflect the reality of Namibian economy dominated by the informal sector. Expansion of the regulatory perimeter can ensure that activities are appropriately and comparably regulated and supervised.
Further, regulatory authorities might need to increase their ongoing scrutiny of the operational and process model of licensed institutions and introduce changes to ensure that they are able to discharge their consumer protection responsibilities. However, regulators are lagging behind the disruptors, and are yet to adapt to this new reality. Innovation requires time, resources and expertise. Not all investments will pay off, and there is a long way from concept to its effective application.
The development of Namibia in the digital space depends on growth in entrepreneurship that leverages digital technologies for market through innovation, an increase in inclusive economic growth, better market regulations, effective policy making, and strong public institutions that reduce political instability in governments, leading to stronger democracies.
The Fourth Industrial Revolution has paved the way for fintech to soon become commonplace. In order for this to happen, fintech will need to become more accessible and financial institutions will need to evolve to keep up with the changes. Technology platforms help to build the financial infrastructure that establishes an economy of record, which can dramatically raise the standard of living and fuel capital markets. Creating universal access and familiarity to financial tools and markets could potentially be one of the greatest catalysts for strong, global economic growth.
Furthermore, technology unlocks many things such as ease of use and greater knowledge, but also transparency. As markets and financial systems become more volatile and complex, technology and data should be able to transform that into a simpler language that encourages more people to engage and the more users who engage with the financial markets, the more efficient they will become.
Fintech is a growing trend in the banking sector, and it breaks the boundaries of the traditional banking systems as it is quicker and provides innovative and secure solutions, and also it is very highly effective.
To that end, technological advancements have their challenges that affect people, businesses and governments. Automation by nature translates into disruption of the labour market. Customers are now at the centre of the economy and physical products and services are now enhanced through digital capabilities that enhance their value. This has created new business opportunities and equally poses a threat to businesses that fail to adapt.
The financial services sector has not been immune to the development of the digital economy and it is benefiting from these technological advancements. Therefore, a more inclusive and sustainable financial sector will only exist if product fit, affordability, financial literacy and convenience issues are addressed. This should happen in an enabling environment where ICT infrastructure benefits all, interoperability of digital financial services is reached and a regulatory framework more focused on financial inclusion is in place.
* by Josef Kefas Sheehama
