Working Paper Series: Special Edition of 2016 to 2018 Interns

Given the significance of financial innovation to broader economic growth, an examination of the key hurdles to the wider adoption of the new technologies may be warranted by governments. One such hurdle pertains to the fees imposed on merchants for very small transactions, which serves as a disincentive for the adoption of the technologies. Consequently, member governments may consider granting certain concessions to merchants to compensate them for any losses incurred through small charges by customers. Additionally, the authorities are encouraged to ensure that the necessary institutions are in place to safeguard the interests of consumers. A key concern here is the quality of the internet connection which is critical for the effective use of emerging products and services within the financial system. Lastly, governments may want to advocate greater card usage via education campaigns that highlight the benefits and potential risks to consumers, thereby empowering them in their decisions to adopt the new technologies. A key potential advantage offered by the new financial products is the efficiency gains they provide to both businesses and consumers, given the ease with which transactions can be carried out. Further, such products may provide a boost to the foreign exchange earning potential of the regional economies through increased tourist expenditures. The study also highlighted some of the regional deficiencies in respect of coverage of the dataset. As a result, the central bank, in collaboration with member governments, is advised to allocate resources towards studying and monitoring measures of financial innovation. Moreover, there also exists very little empirical literature on financial innovation in the region on the macro level, hence more research and focus should be targeted toward this area.

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