The broad adoption of financial technology or fintech could dramatically lower the cost of banking services. Not only will this enhance financial inclusion, it could potentially also help mobilise untapped savings, enable more efficient financial transactions, and make credit more readily available and affordable to small businesses. Emerging Asia fares poorly in financial inclusion even among emerging markets. •  Less than 15% of Asian SMEs have bank credit lines, compared to 24% in Latin America and 28% in Eastern Europe. •  In Indonesia, for example, only about one out of every three persons aged 15 and above has an account with a financial institution. Ironically, Emerging Asia’s relative under-development could turn out to be an advantage. The innovative adoption of digital technology by the financial industry is enabling these economies to leapfrog into more advanced channels for providing banking services. •  A growing number of Asian customers, especially in countries like China and India with rapidly developing technology infrastructure, are using mobile banking apps for payments and funds transfers, even before customers in more advanced economies. •  In India, bank accounts can be linked to biometric identity cards issued under the national Aadhaar initiative, enabling millions who otherwise lack the formal documents required to open a bank account to have access to basic banking services. Of course, technological innovations pose threats as well as opportunities to Asian banks. As in the US, a number of fintech entities in Asia are making inroads as lower-cost alternatives to banks.
The improvements in productivity growth in the United States of the past decade have been followed by significant improvements in potential growth and wealth accumulation in many other countries. The scale of investable assets around the globe is very substantial, and this will be an important source of demand for risk assets. The improvements in monetary policy credibility and in financial strength developed over the past few decades mean that policy around the world has more room to adjust to deal with the challenge in the present environment. Nevertheless, the challenges that remain are substantial. The speed and agility with which public policy makers and private financial institutions respond to the continuing pressures in a rapidly evolving environment will determine how quickly and how smoothly market conditions return to normal – and how rapidly the risks to the economic outlook are mitigated. BIS Review 27/2008  7