Cambridge Centre for Alternative Finance Research: Fintech Can Boost Financial Inclusion if Regulatory Innovation Exists

A new report by the Cambridge Centre for Alternative Finance (CCAF) states that if properly regulated, Fintech can “extend the benefits of financial inclusion to millions of unbanked and underbanked people around the world.” Fintech has the potential to provide enormous benefit for the less fortunate population but, in brief, CCAF concludes that regulators must play an active role in enabling financial innovation and not stymie change.

CCAF is the leading research institute covering innovation in financial services. The Centre has tracked the growth of alternative finance around the world. This most recent report, entitled Early Lessons on Regulatory Innovations to Enable Inclusive Fintech, has been completed in partnership with Fintech Working Group of the United Nations Secretary-General’s Special Advocate for Inclusive Finance for Development (UNSGSA). The Fintech Working Group is guided with the assistance of Her Majesty Queen Máxima of the Netherlands in her role as the UNSGSA.

The document was also supported by the Monetary Authority of Singapore (MAS), a jurisdiction that has established a strategic goal of empowering innovators in financial services.

The CCAF report states that over the past three years, regulators from both developed and developing countries have sought to better understand, and sometimes support, financial innovation. Initiatives such as Fintech regulatory sandboxes or designated committees and offices with a mission to foster innovation now exist in more than jurisdictions.

CCAF notes that currently there are 20 jurisdictions which are pioneering Regtech models as regulators seek to foster innovation internally by providing better services to both consumers and businesses.

Bryan Zhang, Executive Director of the Cambridge Centre for Alternative Finance, explained the mission to Crowdfund Insider:

“This empirical research was conducted over a period of eight months and involved interviewing more than 40 regulators from over 20 countries. We wish to understand how regulators are innovating themselves to better respond to financial innovation and create a more conducive regulatory environment for inclusive Fintech to grow and scale. By learning from the experiences of regulators, especially from developing countries, this study aims to broaden the evidence base on regulatory innovation and encourage the spread of good practices, peer-learning, and policy transfer.”

But while Fintech holds many promises regarding financial inclusion it also creates a substantial challenge for policymakers. This is particularly true in emerging and developing economies, where resources may be limited.

The report explains:

“Regulators with limited expertise in technology may find it difficult to understand Fintech and assess its implications for regulation. Regulators in emerging and developing economies typically have limited resources, and technology-led innovation adds additional pressure. Without an appropriate regulatory environment, inclusive financial innovation may be stifled and financial exclusion exacerbated.”

The research has generated several lessons from early examples of regulatory innovation which can help guide policymakers if they are supportive of financial inclusion and innovation.

Innovation offices can play an important role in boosting Fintech awareness and to support a supportive regulatory response. The report highlights the importance of “early, and close, engagement with innovators.

Executive buy-in can be key. Inter-agency coordination, in jurisdictions with overlapping responsibilities, can boost effectiveness.

Setting eligibility criteria can help regulators prioritize engagement with providers deemed most critical to achieving the innovation office’s established objectives. Importantly, innovation offices are only as good as the quality of their resources, meaning leadership must dedicate qualified and empowered personnel.

Fintech regulatory sandboxes are said to be “neither necessary nor sufficient for promoting financial inclusion.”

Sandboxes do provide benefits but are complex to set up and costly to run. Sandboxes may be a good tool for developing evidence-based policy but they should not distract regulators from pursuing “other avenues and tools for engaging with market participants and adopting more fundamental regulatory enablers to advance financial inclusion.”

Finally, Regtech can support better delivery of innovative financial services, which can directly improve financial inclusion. By leveraging Regtech, officials can more swiftly respond to market developments.

Zhang said regulatory responses to Fintech are still in the early days of their development. The data is still limited and there is no “silver bullet” for effective regulation. More observation and experimentation is needed:

“Many regulatory techniques in this area are resource-intensive, so a cost-benefit analysis will be needed. But this report is an important early snapshot of both financial inclusion through FinTech and steps to regulate this important sector.”

Philip Rowan, Regulatory Innovation Lead at the CCAF, added that regulators in developing and emerging economies can learn much from others who have gone before them. Regulators considering different strategies of managing and encouraging beneficial change can improve outcomes by learning from other jurisdictions:

“One of the biggest takeaways we’ve seen is the importance of an internal mindset and culture which is supportive of innovation within the regulator. Direct engagement between regulators and innovators has also proven to be mutually beneficial, regardless of the form which this takes, through promoting understanding and reducing uncertainty.”

If you are a financial regulator, or policymaker interested in boosting financial inclusion for the unbanked or underbanked, this is a must-read report.

The document also shares, by name, all of the Fintech innovation offices and sandboxes from around the world. There are also several Case Studies that merit review.


The UNSGSA FinTech Working Group is made up of members from Alliance for Financial Inclusion, Ant Financial, Bankable Frontier Association, Bill & Melinda Gates Foundation, Bangko Sentral ng Pilipinas, Better Than Cash Alliance, Consultative Group to Assist the Poor, International Finance Corporation, MAS, McKinsey, Omidyar Network, PayPal, Reserve Bank of India, and the World Bank.

The full report entitled “Early Lessons on Regulatory Innovations to Enable Inclusive FinTech: Innovation Offices, Regulatory Sandboxes, and RegTech” is available below:


Early Lessons on Regulatory Innovations to Enable Inclusive FinTech: Innovation Offices, Regulatory Sandboxes, and RegTech

CCAF 2019-early-lessons-regulatory-innovations-enable-inclusive-fintech

Download the report here.


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