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From Banking and Finance Law Daily, April 5, 2016

Report lays out principles to boost financial inclusion

By John M. Pachkowski, J.D.

The Committee on Payments and Market Infrastructures, in conjunction with the World Bank Group, has issued a set of guiding principles to help countries increase financial inclusion.

The report entitled, “Payment aspects of financial inclusion” is premised on two key points:

  1. efficient, accessible, and safe retail payment systems and services are critical for greater financial inclusion; and
  2. a transaction account is an essential financial service in its own right and can also serve as a gateway to other financial services.

For purposes of the report, “financial inclusion” is interpreted as having access to and using the type of financial services that meet the user’s needs. Also, “transaction accounts” are defined as accounts, including e-money/prepaid accounts, held with banks or other authorized and/or regulated payment service providers, which can be used to make and receive payments and to store value.

To achieve the two key points, the report provides seven guiding principles:

  1. Commitment from public and private sector organizations to broaden financial inclusion is explicit, strong, and sustained over time.
  2. The legal and regulatory framework underpins financial inclusion by effectively addressing all relevant risks and by protecting consumers, while at the same time fostering innovation and competition.
  3. Robust, safe, efficient, and widely reachable financial and ICT infrastructures are effective for the provision of transaction accounts services, and also support the provision of broader financial services.
  4. The transaction account and payment product offerings effectively meet a broad range of transaction needs of the target population, at little or no cost.
  5. The usefulness of transaction accounts is augmented with a broad network of access points that also achieves wide geographical coverage, and by offering a variety of interoperable access channels.
  6. Individuals gain knowledge, through awareness and financial literacy efforts, of the benefits of adopting transaction accounts, how to use those accounts effectively for payment and store-of-value purposes, and how to access other financial services.
  7. Large-volume and recurrent payment streams, including remittances, are leveraged to advance financial inclusion objectives, namely by increasing the number of transaction accounts and stimulating the frequent usage of these accounts.

In addition to guiding principles to help countries advance financial inclusion, the report suggests possible key actions, including providing basic accounts at little or no cost, stepping up efforts to increase financial literacy, and leveraging large-volume payment programs, such as government payments, by adopting electronic payment services.

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