Finternet: the financial system for the future
Summary
Focus
Advances in digital technology have transformed people's lives in recent decades. But large swathes of the financial system are stuck in the past. Many transactions still take days to complete and rely on time-consuming clearing, messaging and settlement systems and physical paper trails. Improving the functioning of the financial system is thus an important public policy objective. But building a financial system fit for the future requires a vision for what we want to achieve.
Contribution
We propose the concept of the "Finternet" as a vision for the future financial system: multiple financial ecosystems interconnected with each other – much like the internet. The Finternet would be designed to empower individuals and businesses by placing them at the centre of their financial lives. Unified ledgers are a promising vehicle to turn this vision into reality. Grounded on a digital-first approach and leveraging tokenisation, unified ledgers would improve existing financial transactions, but also make entirely new financial products and transactions possible. We describe the economic rationale for the Finternet as well as its required technical, regulatory and legal building blocks. In addition, we lay out eight fundamental design considerations that we feel should be a core part of the future financial system.
Findings
We identify three necessary components: an efficient economic and financial architecture, the application of cutting-edge digital technology and a robust legal and governance framework. Unified ledgers are a promising vehicle to deliver on all three. In particular, by bringing together multiple financial assets in a single venue, they could vastly reduce the need for lengthy messaging and clearing processes, thereby delivering more efficient and reliable services for users.
Abstract
This paper lays out a vision for the Finternet: multiple financial ecosystems interconnected with each other, much like the internet, designed to empower individuals and businesses by placing them at the centre of their financial lives. It advocates for a user-centric approach that lowers barriers between financial services and systems, thus promoting access for all. The envisioned system leverages innovative technologies such as tokenisation and unified ledgers, underpinned by a robust economic and regulatory framework, to dramatically expand the range and quality of financial services. This integration aims to foster greater participation, offer more personalised services and improve speed and reliability, all while reducing costs for end users. Most of the technology needed to achieve this vision exists and is fast improving, driven by efforts around the world. This paper provides a blueprint for how key technical characteristics like interoperability, verifiability, programmability, immutability, finality, evolvability, modularity, scalability, security and privacy can be incorporated, and how varied governance norms can be embedded. Delivering this vision requires proactive collaboration between public authorities and private sector institutions. The paper serves as a call for action for these entities to establish a strong foundation. This would pave the way for a user-centric, unified and universal financial ecosystem brought into the digital era that is inclusive, innovative, participatory, accessible and affordable, and leaves no one behind.
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Leader Dialogue Series - Interview with Jane Prokop - EVP of Small and Medium Enterprises - Mastercard
Learn from Jane Prokop - EVP of Small and Medium Enterprises at Mastercard, about her experience attending the Global SME Finance Forum for the first time and the latest challenges of digitalization.
This interview was led by Hans Koning, Global Chief Industry Specialist, Digital Finance at IFC.
‘It is my first time joining the SME Finance Forum and it has been fantastic! One of the real advantages of attending is that you get a chance to meet a lot of innovators. Mastercard is all about partnering and we work with both financial institutions and non-financial institutions globally and for us it is important to get to know potential partners well. Being able to meet with the management team of those companies is invaluable. It is an opportunity for formal and informal communications, and it helps orient us in terms of what is available on the market.
Digitalization in developing markets has been evolving very quickly: there are so many different solutions available that target SMEs compared to 10 years ago. That is a good thing but now SMEs don’t know which type of products they should be using and how those work together.
We are entering a new phase for digitalization, focused on streamlining the offerings and helping SMEs find the right product in a seamless way".
More about Mastercard
Mastercard is a global technology company in the payments industry. Our mission is to connect and power an inclusive, digital economy that benefits everyone, everywhere by making transactions safe, simple, smart and accessible. Using secure data and networks, partnerships and passion, our innovations and solutions help individuals, financial institutions, governments and businesses realize their greatest potential. Our decency quotient, or DQ, drives our culture and everything we do inside and outside of our company. With connections across more than 210 countries and territories, we are building a sustainable world that unlocks priceless possibilities for all.
More about our Leader Dialogue Series
A series of 10 to 15 minutes interviews with CEOs, senior executives of financial institutions and technology companies as well as financial sector regulators. Those one-on-one interviews are led by an industry expert from within the World Bank Group or outside.
Paymentology, the leading next-gen global issuer processor, joins the SME Finance Forum
Washington D.C April 2023 – Paymentology joins the SME Finance Forum as the newest member of our global membership network. Our members are SME financing experts from 80+ countries who share the common goal of expanding access to finance to small businesses worldwide through knowledge exchange and innovation.
“Since 2016, we’ve been implementing our mission to build a global membership to support better SME financing, and since then, we’ve established a network with over 240 active member institutions, which operate in over 190 countries sharing the common purpose of helping under-served enterprises. We are delighted to welcome Paymentology and their global expertise on cloud-native digital payments,” said Matthew Gamser, CEO of the SME Finance Forum.
In March 2021, a merger took place between Paymentology and Tutuka, (founded in 1998 by now Paymentology CEO, Rowan Brewer) resulting in a payments and card processing powerhouse. The move combined the ultra-advanced, multi-cloud platform of Paymentology with the global reach and experience of Tutuka to revolutionise cloud-based processing globally. Today, Paymentology is the leading next-gen global issuer-processor. They give banks, fintechs and telcos the technology, team and experience to easily issue and process any type of physical or virtual card, putting cards and payments into the hands of millions of people, anywhere in the world, rapidly and at scale. Their multi-cloud platform enables fast and seamless deployments, even as a dedicated instance in-country or in-region, in compliance with changing regulatory environments.
“By becoming a member of the SME Finance Forum, Paymentology looks forward to being part of a respected, authentic global network, contributing our strong voice and and supporting more fintechs, banks and telcos to achieve their ambitions with our global payments technology,” says Rowan Brewer, CEO, Paymentology.
About SME Finance Forum
The SME Finance Forum was established by the G20 Global Partnership for Financial Inclusion (GPFI) in 2012 as a knowledge center for data, research, and best practice in promoting SME finance. As an implementing partner for the GPFI, the International Finance Corporation (IFC) was tasked with managing the initiative. The Forum operates a global membership network of +240 members that brings together financial institutions, technology companies, and development finance institutions to share knowledge, spur innovation and promote the growth of SMEs.
Discover the SME Finance Forum members:
https://www.smefinanceforum.org/members/member-list
About Paymentology
Paymentology is the leading next-gen global issuer-processor. It gives banks, fintechs and telcos the technology, team, and experience to easily issue and process any type of physical or virtual card; debit, prepaid, credit, BNPL, revolving and more. Anywhere in the world, rapidly and at scale.
Paymentology’s superior multi-cloud Platform offering both shared and dedicated processing instances, vast global presence and richer real-time data, set it apart as the leader in payments. Its payments experts bring deep, local market knowledge on the ground in 60 countries, across 14 time zones, guaranteeing 24/7 support. Paymentology is deeply committed to increasing financial inclusion worldwide, and to making a positive impact in the communities in which it operates.
Learn more:
Website: https://www.paymentology.com/
G20 Roadmap for Enhancing Cross-border Payments
Click Here to Read: https://www.fsb.org/2022/10/g20-roadmap-for-enhancing-cross-border-payments-consolidated-progress-report-for-2022/