How the pandemic has affected financial inclusion?

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Ever since the Covid19 outbreak first began, multiple countries have issued stringent measures like lockdowns and social distancing which has pretty much disrupted the flow of the entire global economy. Even though the digitization of payments has evolved leaps and bounds, there’s more than half of the developing countries which still settle Government to Person (G2P) payments in cash or cheques. This pandemic will entice governments to push ahead with the development of their digital payments systems, in order to enable more G2P payments.

According to the World Bank Research Observer, even though financial aids have been delivered, G2P payments helps to lower disbursement costs, both for the government and recipients; counters the transactional anonymity of cash by ensuring traceability of payments; is far more secure; and increases financial inclusion by ensuring account ownership among those who are still unbanked. The World Health Organization (WHO) has also advised the public to avoid using cash, in order to use digital payments so as to avoid the spread of COVID-19.

The biggest challenge the Governments across the world will face is financial inclusion. Governments have implemented strict measures to contain the pandemic and the health sector is doing its best to come up with a vaccine. Technology has provided new ways to connect, mostly through video calls and virtual meetups, and also provided us with app-based payment systems.

But the issue is that, fintech alone cannot solve the problems of inclusion. Many excluded communities are mostly difficult to reach and neither it is economically viable. Therefore, it is important that fintech companies work together with governments and regulators.

There is still more work to be done in the financial inclusion front i.e. there’s still around 1.7 billion adults unbanked globally, with a huge proportion of that coming from the Asia-Pacific (APAC) region. This should be looked at as an incredible opportunity for digital disruptors to use technology and provide financial solutions in order to bridge this gap.

As the lockdowns are being extended, more and more households are getting affected, with widespread lay-offs and closure of smaller businesses, people are inevitably turning towards high interest loans to stay afloat, at times like these a digital based government-to-person(G2P) payments method is seen as the most viable financial inclusion technique.

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