A study by the Asian Development Bank (ADB) on advancing financial inclusion through digitalisation found that financial and digital literacy are among the biggest ‘demand side entry barriers’ for availing digital financial services (DFS).
As the ASEAN region is in the throes of a digital financial revolution with the rapid rise in e-commerce and cross-border digital payments, this finding has assumed particular significance.
According to the ‘Policy Note on Digital Financial Literacy for ASEAN,’ released in 2021, the lack of understanding of DFS can also increase mistrust in financial services and the broader financial system, thereby eroding the confidence of consumers in their ability to navigate it.
The document noted that the region is experiencing the emergence of cross-border DFS products and services in e-commerce, payment platforms, and remittances, creating a network that expands across the region and could positively impact the lives of 265 million or 44 percent of adults who are still unbanked.
“It is therefore relevant to tackle the challenges present at the intersection of the rapid digitalization of the financial sector. This is where Digital Financial Literacy (DFL) comes into play. While DFL is a new technical concept across the industry and no formal definition has been established, so far the term is commonly associated with two concepts — financial literacy and digital literacy,” it said.
According to the policy document, these trends have already strengthened the advancement of ASEAN’s regional target to decrease financial exclusion to 30 percent by 2025. This has also encouraged the efforts to improve ‘ASEAN Connectivity.’
While opening the discussions at a video conference on the ‘Master Plan on ASEAN Connectivity (MPAC) 2025’ recently, Ambassador Derry Aman, Permanent Representative of Indonesia to ASEAN and Chair of the ASEAN Connectivity Coordination Committee (ACCC), said that the MPAC, as well as other connectivity initiatives, should aim to unleash and optimise the huge economic potential of the region to maximum its benefits for the people.
“It is important that we set clear, measurable, and quantitative targets in order that we can easily assess the economic and social impacts of this initiative to our community,” he added.
MPAC 2025, adopted by ASEAN leaders in Ha Noi, Viet Nam, on October 28, 2010, recognises that enhancing ASEAN Connectivity would continue to benefit all ASEAN Member States (AMS), through improved physical, institutional and people-to-people linkages, by promoting greater competitiveness, prosperity, inclusiveness and sense of community.
It aims to develop sustainable infrastructure in the region and promote digital innovation, seamless logistics and regulatory excellence.
Given the region’s proximity to China, India and Japan, ASEAN is well positioned to benefit from all types of global flows with more than half of the world’s ‘consuming class’ living around the region by 2025, the Master Plan said.
The promotion of the free flow of goods, services, investment, and skilled labour among ASEAN Member States (AMS), under the ASEAN Economic Community (AEC), could further support intra-regional trade in ASEAN, which is currently less than a third of the share of total ASEAN trade, it said.
Across the ASEAN region, though members have undertaken various interventions for DFL, they acknowledge that the progressive deepening of DFS — and rising concerns about its associated risks — require a coordinated commitment to advance DFL in the region.
In response to this, the ASEAN Working Committee on Financial Inclusion (ASEAN WC-FINC) and Alliance for Financial Inclusion (AFI) collaborated to develop an understanding among ASEAN members of the concept, coordination, development, and implementation of DFL initiatives.
To advance this joint initiative, a survey was conducted in 2020 to establish a baseline for the development of the Policy Note. This survey was followed by in-depth interviews with selected ASEAN countries and a technical workshop designed to provide a platform for ASEAN WC-FINC to build its knowledge on DFL and deliberate on technical considerations. These activities provided critical input for the development of this document.
Digital payments are indeed the most advanced of all DFS in the region, and projections show this segment will exceed $1 trillion in transaction value by 2025. The fact that the region includes 10 markets at various stages of maturity and development in their DFS infrastructure, financial inclusion landscape, mobile phone ownership and internet penetration, results in highly diverse levels of DFL adoption and usage of DFS.
It is expected that DFS will grow further in the whole region. The growth of DFS in the region also comes with the development of the DFS infrastructure as well as its related policy and regulatory frameworks.
“ASEAN regulators have done a commendable job in facilitating the development of an enabling DFS ecosystem in the region. As the market evolves, regulators will need to better identify underlying risks and come up with effective regulatory interventions. This is in the interest of increasing the overall quality of the DFS ecosystem and public trust in it,” the policy note said.
Meanwhile, ASEAN’s Regional Payment Connectivity (RPC), participated by Indonesia, Singapore, Thailand, Malaysia, the Philippines and Vietnam, aims to enhance cross-border payment systems in the region. The RPC initiative to boost cross-border payments was agreed to during the 2022 G20 Summit in Jakarta.
The partnership aims to support the post-pandemic recovery of countries in the region with a specific aim to benefit micro, small, and medium-sized businesses (MSMEs). MSMEs are the dominant form of business enterprise in Southeast Asia, accounting for between 88 to 99 percent of all businesses as well as approximately 70 percent of total employment.
One of the primary advantages of this regional payment system is its ability to protect ASEAN member states from exchange rate fluctuations. As transactions are conducted in local currencies, settlements are not affected by fluctuations in the US dollar exchange rate.
The National Bank of Cambodia (NBC) is also working on a plan to expand its cross-border payment cooperation with Singapore, China and India in the near future, in a bid to promote cross-border economic activities using local currencies.
NBC has already signed agreements with the central banks of Thailand and Laos for using its Bakong payment system for cross-border payments and is expected to finalize one with Vietnam’s central bank soon.
Source: Khmer Times
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<p>Time: 2024 By: Ministry of Industry and Trade</p>
