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The global Covid19 pandemic has, along with the catastrophic loss of life, had an adverse and far-reaching impact on the global economy, last seen a century ago. The contagiousness of the virus has forced a change in behaviour, most notably, social distancing, to curtail its exponential spread.

Consequently, there has been an increase in the use of digital communication tools as firms sought new ways of continuing with provision of services while maintaining limited physical contact. The same reason has seen a rise in the adoption of digital financial solutions as economies pushed to tick along during the pandemic. Non-direct and cashless methods of transacting and accessing financial services have become the preferred, if not the only, solution in the different stages of lock-down experienced the world over. Financial inclusion has meant much more in these times than ever before as the conventional means of accessing goods and services became, to a large extent, untenable.

From a macroeconomic perspective, financial inclusion has been proven to spur economic growth as participation in the economy is broadened especially in the low-income segments. This is particularly important for the global economy that is yet to emerge from the aftermath of the pandemic. This type of economic growth has also proven effective in narrowing income inequality.

Ordinarily, the increased adoption of digital financial services has been higher in countries with lower traditional financial penetration, primarily Africa and Asia. It is important to note, however, that the challenges constraining financial inclusion which existed before the pandemic are still present. These countries are characterised by low mobile penetration, limited access to the internet, prohibitive internet data cost, low literacy amongst target users as well as digital security concerns. However, necessity brought about by the pandemic is dropping the threshold for experimenting with non-traditional digital financial products.

The prevailing conditions are also conducive to introduction of innovative products into the market given the natural pull of a captive market and subsequent likelihood of reaching critical mass for adoption of a particular service offering. This is requisite in making these services economically viable. As an example, a remittances company in one of the countries in Africa introduced a service that enabled diaspora population to remit funds specifically for food stuff to be collected in the receiving country. There has also been adoption of digital financial services by government entities to reach non-urban population.

Increased demand for digital services has further resulted in more competition within the sector. This is necessary for innovation, product differentiation and lowering of prices. Customer experience is subsequently improved as competitors jostle for market share.

To come full circle, the regulatory framework needs to keep pace with the growth in penetration ratios and potential product proliferation. Together with the service providers, authorities have an obligation to ensure that digitalisation still addresses the traditional risks inherent in financial transactions – money laundering, cyber security risks and funding of terrorism, to name a few. An enabling environment from policy makers is also needed to accelerate financial inclusion by specifically targeting technology costs, electricity connectivity and literacy, both digital and financial.

Multilateral institutions are placing high priority in encouraging growth and penetration of digital services. The main focus has been through the spearheading initiatives aimed at setting of policy guidelines that help the global economy use financial inclusion to aid broad development agenda including financial services penetration, stimulating post-pandemic economic recovery and addressing gender inequality. Mobile financial solutions, as an example, have been shown to be more effective in bridging the gender equality gap than traditional banking products.

The impact of digital financial inclusion especially in countries with low financial penetration cannot be underestimated. Coordination between policymakers and industry players and a broader global alignment has the potential to buttress the turnaround from the effects of the global pandemic and accelerate the path to more inclusive and more equal societies. Deepening of the digital ecosystem within markets creates analogous data to traditional financial and credit metrics. However, there is the added advantage of inclusion of the unbanked segments of the economy and allowing for the provision of 2^nd tier services such as short term credit facilities to that segment. This is one of the important channels that has the potential of transforming the lives of low income and rural households and enjoin them to the more formal economy.

The advent of digital financial services cannot be attributed to necessity. However, the global Covid19 pandemic has certainly catalysed its adoption and penetration and played a part in advancing financial inclusion especially in developing countries where traditional banking channels have limited roll out and reach. Further, the digital financial services sector is proving essential in addressing the much needed broad-based economic turnaround with the promise of a sustainable contribution from here on.