The economic effect of the current global COVID-19 lockdown will be severe. An essential focus for supporting the economic rebound is to invest in efforts to deepen economic integration and further lower trade costs.
Digitization, and the creation of specialized ecosystems, will be the single most efficient approach to reduce trade cost on a global scale, which will benefit all countries currently impacted by COVID-19.
A robust technical infrastructure and end-to-end digital processes (“paper-less”) are key elements to safeguard productivity during disastrous events. First-response actions such as implementing business continuity plans and stabilization of business operations should be accompanied by proactive measures: companies should rethink and accelerate their digitization strategy to increase resilience and optimize business processes at the same time.
Contractual arrangements with IT service providers should be revisited, data privacy and security topics as well as industry-specific regulations must be kept in mind. Although companies are now busy responding to the COVID-19 challenge, we will soon face a recovery phase that will once again show the importance of a holistic and sustainable digitization strategy. Using “lessons learned” is key to prepare for and thrive in the future.
However, in a rush to digitization, we must be careful not to perpetuate a new kind of financial exclusion. Many rural villages have weak foundations to support robust digital finance, more than 1 billion people cannot read, write or understand the long number strings necessary to transact on mobile phones, and while more have smartphones, the devices and data plans are still not affordable to many low-income segments. As they seek to push for digitization, policymakers should have a comprehensive sense of their country’s “digital repertoire”, an approach which includes the network available, the capacity of devices being used, the market’s digital services, and the digital capability of individuals. This is according to CFI
Fraud and scams
A related concern is fraud and scams in an environment where a pandemic is weighing on everyone’s minds, especially for digital immigrants. David Medine at CGAP has documented some of the abhorrent COVID-19 related scams, both analog and digital, from fake emails from the WHO or CDC peddling treatments, to messages/calls from scammers pretending they are with a friend/family member at a hospital in need of payment. Beyond the immediate health crisis and the fears that scammers feed off, digital finance has a fraud and a fraud redress problem. At CFI, we are especially attuned to this, having done demand-side research in Rwanda as well as anti-fraud educational campaigns via radio. We’ve learned how difficult it is for victims to report fraud and recover their balances.
These considerations are not to discredit digital finance as one of the most viable solutions for the near-term needs brought about by COVID-19, as well as long-term financial inclusion goals. Many of these issues have been raised for years in the broader context of responsible digital finance – but they take on added urgency in an environment where policies are being designed and rolled out quickly. Governments and stakeholders around the world can and must meet the moment through careful planning and communication, robust monitoring and feedback loops, picking the right experts and partners, and most of all, keeping the most vulnerable users in mind.