“Financial inclusion” key to delivering full development potential of e-commerce
Speeches – DG ROBERTO AZEVÊDO
Minister Mora,
Excellencies,
Ladies and gentlemen,
Good morning and welcome to the WTO.
Let me start by thanking the ‘Friends of E-commerce for Development’ for organizing this event — specifically: Argentina, Chile, Colombia, Costa Rica, Kenya, Mexico, Nigeria, Pakistan, Sri Lanka and Uruguay.
This is another important initiative in your efforts to deepen members’ understanding of e-commerce issues.
And it is obvious that these issues are of interest to many Members, regardless of their level of development. There may be different challenges, opportunities or perspectives but it is clear to me that many of you want to better understand this phenomenon.
Of course this is not surprising. E-commerce presents significant opportunities for growth, development and job creation. It has already helped to lower trade barriers for businesses and consumers alike.
By reducing the costs associated with distance, e-commerce provides businesses with access to new market opportunities and global value chains. This is particularly important for small businesses, those located in rural areas, as well as land-locked and other geographically challenged countries.
And for consumers, it means access to a wider range of products and services suppliers — and at more competitive prices.
However, with 4 billion people still offline, the opportunities offered by e-commerce are still out of reach for many and its benefits remain unevenly distributed. While some countries have made significant headway in recent years, others are struggling to keep up.
If we want e-commerce to be an engine for inclusive growth and development, we must understand its challenges and address them in a way that ensures better access and better opportunities, particularly for those who are behind.
Underdeveloped financial and payment systems are one of these challenges. It is clear that traditional banking and payment methods are often ill-suited to the digital environment.
E-commerce will not deliver its full potential if many are still financially excluded. And while there has been progress toward financial inclusion, significant challenges remain. As you will know, an estimated 2 billion adults worldwide don’t have a basic bank account.
Financial exclusion affects not only individuals but businesses, and therefore trade, as well.
The World Bank has estimated that more than 200 million formal and informal micro, small and medium-sized enterprises in emerging economies lack access to basic financial services to thrive and grow. No wonder therefore that financial inclusion is becoming a priority for policymakers, regulators and development agencies globally. In fact it is identified as an enabler for 7 of the 17 Sustainable Development Goals.
Digital payments are actually an entry point for financial inclusion. Integrating digital payments into the economies of developing nations is crucial for broad economic growth and individual financial empowerment.
Technological advances, especially in mobile technology, have provided alternative solutions — and they have been advancing at a tremendous speed.
We have all heard of M-PESA, which became a world leader in mobile-money. It showed the potential of these solutions — and the potential of developing countries to leapfrog forward in their use of technology.
A couple of years ago it was easier to pay for a taxi with your phone in Nairobi than in New York — or Geneva. Now the developed world has caught up. Mobile money is everywhere.
New ideas and new solutions will continue to spread at a frenetic pace — and there’s no reason why developing countries can’t be at the forefront.
But we should be conscious as well that payment facilities are not credit facilities — and this is particularly important where cross-border transactions are concerned.
Traditionally in a trade transaction, the exporter is paid upon shipping and the importer only pays when the merchandise is delivered and its integrity is verified. It is the job of trade finance to bridge the gap between the two.
In contrast, with e-commerce, the importer pays cash in advance and then simply has to wait and trust that the goods will arrive in a timely fashion and function as expected.
Clearly, for many SMEs, this poses significant problems. With low cash flow and tight margins, such a financial arrangement is costly when inputs come from foreign suppliers. Moreover, consumers tend to opt for better known traditional suppliers, to the detriment of SMEs, even when their price is competitive. So, SMEs face significant challenges both as buyers and as suppliers.
Some e-platforms are providing solutions to deal with this — but that can come with strings attached, such as exclusivity to sell on that platform. The emerging “FinTech” sector is also stepping into this arena. But so far they only work for the top end of SMEs — those which have certified accounts, are registered, and so on. These are positive steps, but more could be done.
Awareness among smaller companies is also an issue. A recent survey by the Asian Development Bank found that 70% of SMEs were not aware of digital finance.
So, again, the challenge is to ensure that these evolving technologies work both to tackle financial inclusion and to close the digital divide — not widen it even further.
And this brings us to the broader and even more fundamental issue of connectivity.
Many economies face challenges from a lack of reliable infrastructure, poor internet access and affordability, and a wide range of other economic and regulatory barriers. These include weak legal and regulatory frameworks, inadequate privacy and consumer protection, low consumer trust, poor IT skills — and the list goes on.
In conversations here at the WTO, Members have been raising many of these issues, but it is clear that there are still divergent views on how to advance the e-commerce discussion. And there are concerns that the digital divide and the knowledge gap would limit some Members’ participation in the talks. These concerns need to be addressed to ensure that a meaningful and inclusive debate can take place.
I think there is broad agreement that the development dimension of e-commerce needs to be part and parcel of our continuing conversations. This will be fundamental to allow all WTO Members to engage constructively and to ensure that e‑commerce works for inclusive growth and development.
However, it is also important to recognize that the challenges posed by e-commerce are many and complex — and not all of them are trade-related. Addressing them will require dialogue and cooperation amongst different actors as the issues involved cut across different areas of expertise.
That is why events such as today’s seminar are so welcome. They allow Members to exchange information, learn from national experiences, interact with different stakeholders and look at how to better engage in discussions. I think events like this also help to make the debate more dynamic and more inclusive. As such, they are a valuable complement to our work here.
In addition to participating in Member-driven initiatives and workshops, the WTO continues to engage with other international organizations such as UNCTAD, ITC, the World Bank and the regional development banks.
Different international organizations have different and complementary expertise. So we need enhanced coordination to ensure an effective and coherent response to the constraints that Members are facing. The private sector is also showing a lot of interest here — both large and small companies, in developed and developing countries alike.
There will be a range of opportunities to deepen these discussions in the months ahead — including the 6th Global Review of Aid for Trade in July.
E-commerce has been on the WTO agenda since 1998. However, many still feel that we have to understand these issues much better — the challenges, the opportunities, and the broader implications.
I hope that today’s discussion will help to shed further light on all of this, and inform this ongoing e-commerce debate. I wish you a very productive seminar.
Thank you.
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