UN weighs in on Big Tech governance debate

Keystone/Christian Beutler

Digital finance in the Covid-19 era is growing up fast. 

Alongside the surge in remote working and e-commerce, the pandemic is also adding fuel to changes in the financial sector, with more people paying and transacting online than ever before.

Apple Pay accounts for around five per cent of global card transactions.  In China, AntGroup is taking the charge, with the payments services firm now preparing for what could be the world’s biggest IPO. Alipay and WeChatPay each have more than one billion users, mainly in China but increasing rapidly in Asia. In Africa, mobile payments are also booming, with Zimbabwean firm EcoCash transacting close to 90 per cent of Zimbabwe’s GDP in 2019.

Big tech companies are joining fintech players - and cryptocurrency firms - in stepping into the space occupied by traditional banks and the rapid growth of these digital titans is resetting the rules for the whole financial system.

Why we are talking about it. As the world grapples with the dizzying rise of big tech firms and how to regulate them (or break them up) the United Nations is also weighing their impact on developing countries. On Friday, the UN Development Programme, together with the Swiss Federal Department of Foreign Affairs and the Kenya Central Bank launched an initiative looking at how the governance of big tech and digital finance platforms can better take into account sustainable development.

The Dialogue on Global Digital Finance Governance is part of the Digital Finance Task Force set up by secretary-general Antonio Guterres last year to explore how digitalisation is reshaping finance.

“One of the issues we are trying to address is … the spillover effects across multiple developing nations,” said Aiaze Mitha, senior advisor on the Digital Finance Task Force and the dialogue.

Until recently, the governance of these platforms was mainly focused on financial stability and the prevention of illicit financial flows, he said. Financial inclusion and climate change have been growing areas of focus but other issues impacting people’s rights and livelihood remain overlooked.

“What the dialogue is trying to do is to start really expanding this into other aspects, from intrusion into one’s privacy, to algorithmic biases that might exclude people, but also SMEs, on e-commerce platforms from accessing online markets and accessing credits for instance, to other potential issues like the quality of work in the gig economy,” he told Geneva Solutions.

Fintech’s success also brings risks. From ride-hailing and food delivery apps to mobile banking and peer-to-peer lending platforms, the growth of fintech has created new sources of livelihood and income. Online banking applications have also been credited for helping to democratize finance, putting people in more direct control of their money, while also helping SMEs and individuals access new sources of lending.

But their meteoric growth also brings new risks - and not just surrounding data privacy or cybersecurity issues. “It’s the other effects that are being less understood and considered in international governance that we are interested in,” he continued.

“If an Amazon in the US decides to prioritise household essentials for the US market in response to the Covid-19 crisis, what is the impact on hundreds of thousands of SMEs in their supply chain in other parts of the world?”

The digital task force’s new platform - or “dialogue” -  will aim to foster talks between UN representatives, regulators, development banks and fintech firms before eventually laying out a set of principles or governance norms.

Facebook public policy and communications lead Lee Brenner, who has been involved in the building of the Novi digital wallet for the tech firm’s cryptocurrency project Libra, took part in the panel discussion on Friday to mark the launch of the platform, alongside Marianne Haar, from the Green Digital Finance Alliance and Natalie Jabangwe, CEO of Zimbabwe’s Ecocash.

Among the issues discussed were data governance and monopolization risks, the role of e-commerce platforms, taxation issues, and the future role of digital currencies in shaping the financial market. Achim Steiner, co-chair of the Digital Finance Task Force and UNDP administrator, said:

"Big fintechs present a different challenge in that their size and scope present much greater potential for both positive and negative impacts. Strengthening the opportunities and mitigating the risks with governance innovations will ensure that big fintechs and fintech follow a similar path in supporting the greater good.”