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The G20, consisting of the 19 most advanced economies globally, along with the European Union and, more recently, the African Union, has released a policy guide outlining how the development and implementation of digital public infrastructure (DPI) can significantly advance financial inclusion and enhance productivity in the Global South.
Produced jointly by the World Bank and the G20 Global Partnership for Financial Inclusion (GPFI), this 78-page document delves into DPIs and their pivotal role in the financial sector. It explores how DPIs can effectively promote financial inclusion and productivity, areas that warrant further exploration, and includes case studies and use cases from countries across Africa, Asia, Europe, and Latin America.
With an emphasis on interoperability and an open framework, DPIs can nurture inclusive economies and grant vulnerable populations access to vital services with ease and security through efficient payment platforms. The document underscores that such infrastructure also has the potential to guide nations toward achieving the United Nations’ Sustainable Development Goals (SDGs). India, for instance, recently partnered with the UNDP to endorse DPIs as a means to fulfill the SDGs.
Highlighting the India Stack, which encompasses the Aadhaar digital ID and the interoperable UPI digital payments platform among other DPIs, the G20 asserts that DPIs can serve not only the financial sector but also healthcare, education, and social welfare.
The policy publication asserts that while “DPI has the potential to help countries leapfrog their digital transformation,” it can also “play a critical role in accelerating this digital transformation in an inclusive way.”
It further notes that while significant progress has been made in global financial inclusion efforts through emerging digital financial services (DFS), there is still much work to be done, and DPIs can be a game-changer.
“DPIs, if well managed, can lower transaction costs, catalyze innovation, foster competitiveness and interoperability, enhance individual user experiences and choice, and, through their design, provide new avenues to address many of the risks inherent to DFS.”
For the private sector, DPIs can create opportunities for innovation, increased efficiency, and access to new markets and credit, provided the necessary institutional and market conditions are in place.
The G20 document underscores the importance of prioritizing safety, trust, and a robust data protection framework in building such systems. This is because DPIs have the potential to introduce new risks or exacerbate existing ones, including operational, legal, regulatory, insolvency, exclusion, and financial consumer protection issues.
To mitigate these risks and ensure that DPIs genuinely promote financial inclusion and productivity, authorities are urged to design DPIs thoughtfully by establishing an enabling environment through widely accepted best practices, encouraging appropriate risk-based regulation and supervision for their use in the financial sector, and promoting sound internal governance structures, among other measures.
The recommendations outlined in the policy document are indicative, voluntary, and non-binding. They are primarily intended for public authorities but can also be valuable for other relevant stakeholders.
India’s UPI Achieves Record Monthly Transactions in August
In related news, India’s UPI payments system, a cornerstone of the India Stack, reached a significant milestone last month, recording 10.58 billion transactions, up from 9.98 billion in July, according to NDTV.
The National Payments Corporation of India (NPCI), which manages the platform, reported a 67 percent year-on-year increase, with India’s Union Telecoms Minister, Ashwini Vaishnaw, lauding this achievement as a “new record.”
The NPCI celebrated this milestone and called for continued momentum.
India’s UPI has garnered attention from numerous countries, with three African nations currently in discussions with India about partnerships to tap into the UPI’s wealth of experience.
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