Bryan Barnett on The Supervisory Challenges of Financial Inclusion

Bryan Barnett has been one of the long-time advisors to the Mifos Initiative. We’re fortunate to have his insight and guidance in helping us shape how we can build open standards for innovation and open source digital financial services platforms to improve transparency, increase the effectiveness of regulation and ensure high consumer protection.

Recently he published an informative and eye-opening post to the Alliance for Financial Inclusion blog in his role as Banking Advisor to the U.S. Treasury, Office of Technical Assistance. His post, The Supervisory Challenges of Financial Inclusion, closely examines the growing challenges that regulators faces in both developing the rules and regulations to govern the authorization and operations of financial inclusion providers as well as supervising those institutions to ensure regulations are followed and risks are addressed.

The broad array and widespread heterogeneity of non-bank financial institutions (NBFIs) as well as the growing criticality of agent networks has made supervision and ensuring consumer protection a daunting task.

In contrast to traditional banks which are relatively few and relatively large, NBFIs are for the most part numerous and small. A supervisor formerly responsible for at most a couple of dozen institutions may now be responsible for hundreds. And whereas all banks are broadly similar, there is now much greater heterogeneity among the types of institutions and products subject to oversight.

Coupled with rapid fintech innovation and proliferation of new payment systems, the workload for regulators is ever growing.

To this must be added rapid evolution in electronic payment systems, involving a host of new types of payment service providers and payment technologies. Gone are the days when it was enough to keep an eye on things like check clearing, cards or the ACH.

Bryan provides some key insights into how the sector as a whole and regulators can address these challenges:

Heavier reliance on information technology and effective analysis of large amounts of data.
Simple efficient systems for tracking and approving new products and services
Creation of national agent registries with unique IDs for each agent and proper systems and procedures for customers to file complaints and feedback for agents.
Willingness to rely on qualified independent auditors and recognized international standards for certifications of IT systems.

Please visit http://www.afi-global.org/blog/2017/01/supervisory-challenges-financial-inclusion to read his full post.