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E-Finance for Development: Policy Challenges and Opportunities

This presentation by John Hawkins, delivered at the UNCTAD event in Monterrey, explores the intersection of e-finance and development. It examines issues such as internet usage and mobile penetration in 2000, the digital divide, and the challenges of e-money and online payments. Hawkins discusses the implications for financial supervisors, emerging business models, operational risks, and the effects of electronic trading on market access and costs. The analysis emphasizes the importance of understanding network economics in the evolving landscape of e-finance.

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E-Finance for Development: Policy Challenges and Opportunities

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  1. E-finance & development: policy issues John Hawkins Bank for International Settlements* Presentation to UNCTAD event on “E-finance for development” 19 March 2002, Monterrey, Mexico *Opinions expressed in this paper are not necessarily shared by the BIS

  2. Internet usage in 2000

  3. Mobile phone and internet penetration in 2000

  4. Digital divide • between countries • within countries

  5. Payments issues • e-money • personal online payments

  6. Challenges for supervisors • internet-only banks? • “clicks and mortar” • competitors (eg telecoms) • new business models (eg aggregators) • operational risk (eg outsourcing) • cross-border issues • uncertainty

  7. Trading in traditional markets

  8. * * as e-trading has no physical marketplace

  9. Electronic trading a) Fragmentation and consolidation • fragmentation through new venues • links between markets (or search agents) • centralising previously OTC markets • need to understand NETWORK ECONOMICS

  10. Electronic trading b) Market access • simultaneous interaction(floor) • decentralised(telephone) • access in now a matter of choice • still role for dealers both (electronic)

  11. Electronic trading c) Transparency • electronic trading potentially much more transparent • but will this be realised? • and is it always desirable[means, not end]

  12. Electronic trading d) Trading costs • electronic trading lowers costs ( 30%) Explicit costs • big gains • STP the key Implicit costs • bid-ask spreads lower • market impact costs may be lower

  13. Further reading “Electronic finance”, BIS Papers 7, Nov 2001, (www.bis.org) “E-finance in emerging markets”, World Bank Financial Sector Discussion Paper 4, June 2001, (www.worldbank.org) “Electronic trading in wholesale financial markets”, Bank of England Quarterly Bulletin, March 2002, (www.bankofengland.co.uk)

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