Comments on “Fintech and Financial Inclusion in Southeast Asia and India”

Abstract

Morgan (2022) writes an interesting and valuable survey on fintech and financial inclusion in Association of Southeast Asian Nations (ASEAN) and India. This paper is very timely and topical. It provides a good and informative description of the development of financial technology and digital payments in India and ASEAN. This paper also shows how fintech can help promote financial inclusion. Morgan argues that fintech adoption is spreading faster in higher income countries, and, within countries, it is spreading faster among higher income and more highly educated groups. In addition, Morgan points out the potential of digital payments for expanding financial inclusion. The information that Morgan provides is very useful for readers who want to know about the development of fintech in India and ASEAN. Morgan examines differences in the strategies and implementation of financial inclusion and fintech between India and ASEAN and draws lessons and policy recommendations from these findings. This paper also provides a comparative perspective on regulatory developments in several ASEAN countries and India. I agree very much with the author's analyses and findings, however, to enrich and sharpen Morgan's analysis, I suggest several things:

First, Morgan does discuss general concepts of how fintech can promote financial inclusion, but it would be more interesting for example if he could provide examples or discuss how fintech in India or ASEAN can reduce transaction costs in financial transactions.

Second, Morgan points out that despite the rapid growth of alternative finance in recent years, the overall rate of penetration is still small. It will be useful if he could elaborate on the prospects of alternative finance in the future.

Third, one of the objectives of Morgan's paper is to discuss the relationship between financial inclusion and financial stability as well as the various risks that arise from the development of this fintech. However, I found the argument is very general. I think Morgan should be more articulate and more explicit about this so that readers can see this argument clearly.

Fourth, on regulatory issue, we understand that digital innovation happens so fast, the production cycle becomes so short. Goods or services made today will become obsolete in a short period of time. So how does the government regulate it? Regulations will tend to lose ground quickly when the new technologies emerge. How can the government make regulations for one industry or one product, if the rules soon become obsolete due to new innovations. Government regulations or laws, I believe, will need to be more general and flexible in the future. The issue is that if the regulations are not explicit, how can they adequately govern them? The conundrum is that while innovation cannot be stifled, it must be protected. What is the best way to draw this line? This is a big issue that might become a potential problem in the future. In my opinion, regulators from various countries must change their mind set from agreements on rules to agreements on principles. It would be useful if Morgan can touch this issue when elaborating on the regulatory issues.

Fifth, in the discussion on regulation, Morgan does convey descriptively about the development of regulations in several ASEAN countries and India, but it would be very interesting if he also discusses the potential problems that arise related to this regulation.

Sixth, in the conclusion section, Morgan points out that fintech tends to widen the gap in income and wealth. This is an important issue. It would be useful if Morgan can elaborate more on this issue.

Despite all these comments and questions, in sum, this paper is worth reading and offers an important contribution for survey on fintech development in India and ASEAN. Furthermore, various lessons can be drawn from this paper, particularly a comparative study with other countries with similar problems.