About to change the world's financial landscape: What has the G20 done for digital inclusive finance?

Regulation, risk, infrastructure... G20 sets eight principles for digital financial inclusion:

In the past decade, with the continuous innovation of technologies such as the Internet, mobile communications, big data and cloud computing, digital finance has developed greatly. Since the concept of "inclusive finance" was proposed in the International Microcredit Year in 2005, inclusive finance has gradually become popular in the past decade, thanks to the progress of digital financial technology, which has greatly improved the lives of vulnerable groups such as women, the elderly, farmers and small and medium-sized enterprises.

Despite this, according to the World Bank's Global Financial Inclusion Index released in 2015, there are still about 2 billion people in the world who do not have bank accounts; only 21% of people can obtain services through formal financial institutions; 72% of adults lack financial knowledge; and rural loans only account for 23% of the total loans.

At the just concluded G20 Hangzhou Summit, digital inclusive finance became a hot topic of public concern. After many days of discussion and consultation among G20 member countries, the first international common program in the financial field, the G20 High-Level Principles for Digital Inclusive Finance, was officially announced. The G20 High-Level Principles for Digital Inclusive Finance contains a total of 8 principles and 66 action recommendations.

Principle 1: Leveraging digital technology to promote inclusive finance

Key recommended actions include:

In order to achieve the policy goal of digital inclusive finance and promote the development of digital finance, we should ensure that relevant national strategies and action plans that are in line with national conditions, executable and goal-oriented are established for new digital financial models; effectively coordinate the relationship between policy-making agencies, central banks, regulatory authorities, other digital financial service-related institutions, and consumer protection agencies; maintain and promote cooperation and dialogue between government departments and the industry to ensure that both parties have a common understanding of the development goals of digital inclusive finance and market expectations; government departments and private institutions should support the development and use of non-cash digital payment technologies; the industry should be customer-centric and provide them with convenient, low-cost and secure digital payment functions; strive to eliminate obstacles to the development of digital financial services, including making it easier for users to access and use the Internet and mobile devices, reforming the tax system and strengthening international cooperation.

Principle 2: Balancing innovation and risk in the development of digital inclusive finance

Key recommended actions include:

Minimize related financial risks by encouraging digital innovation markets and cooperation between public and private financial institutions; collaborate with industry risk management experts to better identify, research and assess the risks arising from the use of new digital financial technologies; regularly share knowledge between regulators and service providers and establish clear communication channels. Regulators and the industry should establish good risk management strategies based on the legal framework; encourage financial institutions to use multiple data sources to conduct new credit assessments for small and medium-sized enterprises (SMEs); the industry should fully discuss and research the benefits of digital currency for inclusive finance.

Principle 3: Build a sound legal and regulatory framework for digital financial inclusion <br/>Key recommended actions include:

Establish a flexible legal regulatory framework for all market participants and regulators, including in the areas of capital operation and flow, market conduct rules, innovative risk management and supervision, and consumer protection; promote fair and open industry competition, establish clear and consistent norms and standards, and ensure that all market participants have equal and legal rights while assuming due responsibilities; evaluate national and local laws related to digital inclusive finance, and resolve overlapping and contradictory parts. Ensure clear division of responsibilities for regulators; provide relevant knowledge training to regulatory departments, ensure that the heads of regulatory agencies have a full understanding of digital inclusive finance, and strengthen and improve their regulatory capabilities; when formulating relevant regulatory laws and policies, ensure that they are easy to understand and disseminate.

Principle 4: Promote the construction of digital financial services infrastructure

Key recommended actions include:

Expand the construction of a digital financial services ecosystem across the country (including remote areas), including financial, information and communications technology infrastructure; governments and industries should give priority to using digital infrastructure to develop their social and economic levels; and strengthen inter-governmental cooperation;

Carry out the construction of a modern, large-scale retail payment infrastructure;

Establish an open payment platform and strengthen its connection with the national clearing and settlement system; encourage the exploration and research of the application and development potential of technologies such as blockchain to improve the transparency, efficiency and security of financial behavior; establish a flexible and massive credit data reporting system model based on the International Committee on Credit Reporting (ICCR); encourage innovation and expansion of credit reporting system data sources, such as incorporating relevant data on mobile payments, electronic money accounts and e-commerce transactions. At the same time, attention should be paid to the protection of consumer rights and privacy data.

Principle 5: Take responsible digital financial measures to protect consumer rights <br/>Main action recommendations include:

Establish a legal protection framework for digital financial service consumption. In particular, establish a good regulatory legal framework for customer fund protection for non-prudential service providers, such as trusts and supplementary insurance businesses; ensure that consumer complaint channels remain open;

Digital financial service providers should provide adequate training to their agents and employees; integrate information from various aspects to establish a clear concept of "personal data"; ensure that consumers' personal data will not be used for any unfair or discriminatory financial services; and develop guidance manuals for data accuracy and security in areas such as financial transactions and accounts, digital financial service marketing, and consumer credit scores.

Principle 6: Promote digital and financial literacy

Key recommended actions include:

According to this principle, consumers should be able to identify the financial qualifications for operating emerging financial products; use emerging digital tools to carry out literacy programs for digital financial services; increase SMEs' awareness of the functions of digital financial services to help them improve their competitiveness; and help consumers make more informed decisions by supporting the development of comparison tools for digital financial products and services.

Principle 7: Facilitate customer identification for digital financial services

Key recommended actions include:

Ensure universal and affordable birth registration and other basic identity information systems; ensure that government identity information databases are used reasonably and legally under the supervision of data protection laws; and establish a technology-neutral, interoperable national data center;

Strengthen research on innovative identity recognition technologies, such as digital biometrics; establish a legal framework to protect the privacy and security of consumer identity data, requiring that such data can only be used and disclosed with the knowledge and consent of consumers. At the same time, the right of users to seek redress should be standardized and improved, so that they can obtain relevant compensation when their rights or privacy are violated.

Principle 8: Monitoring the Development of Digital Financial Inclusion

Key recommended actions include:

Establish national key performance indicators for the use of digital financial services; establish or adjust financial data collection systems to cover new digital financial providers and products; establish a memorandum of understanding between regulators and establish an effective and open information exchange mechanism; establish an online data portal or regularly publish data reports to provide publicly available data on the use of digital financial services; conduct effectiveness evaluations on key digital financial inclusion projects and reform plans; and monitor the progress of the above eight high-level principles in all aspects.

G20 "Implementation Framework of the Action Plan on SME Financing": Countries should self-examine the construction of credit reporting, collateral registration and bankruptcy systems. In July 2016, the G20 Finance Ministers and Central Bank Governors Meeting issued a communiqué stating that the G20 adopted the "G20 High-Level Principles for Digital Financial Inclusion", "G20 Financial Inclusion Index System Upgrade" and "G20 SME Financing Action Plan Implementation Framework" developed by the Global Partnership of Financial Inclusion (GPFI). The communiqué emphasized that the G20 encourages countries to consider these principles when formulating their broader financial inclusion plans, especially those in the field of digital financial inclusion.

The above three documents were released during the G20 meeting in Hangzhou on September 4-5. Among them, the "G20 SME Financing Action Plan Implementation Framework" (hereinafter referred to as the "Implementation Framework") stated that SMEs play an important role in the creation of global jobs, investment, innovation and economic growth. "90% of enterprises are SMEs, which have created more than 50% of jobs, and therefore play a key role in the global economic recovery."

However, the Implementation Framework states that due to the great differences in situations in different countries, there is no unified definition of "small and medium-sized enterprises (SMEs)", and each country uses its own definition when filling out the questionnaire.

In order to promote financing for small and medium-sized enterprises in various countries, the Implementation Framework provides countries with a self-assessment framework in three major areas: credit reporting, secured transactions and collateral registration, and bankruptcy system.