Regulating Financial Innovation: What Does It Take?

Innovations bring a unique opportunity to address financial exclusion. Regulators play a vital role in creating enabling environments in which responsible innovation can emerge, be tested, and scaled. There are many innovations reaching financial markets and regulators need to prioritize.

This working paper introduces vision-guided regulation as an approach that helps financial sector regulators harness innovation for inclusive finance. The paper draws on a combination of desk research, remote interviews, and in-country visits.

Three key findings from this research are as follows:

• Regulators can succeed in harnessing innovation for inclusive finance, no matter what their resources or operating context.
• Having a vision for the future of financial markets is key to success.
• Other key elements to success are: tone at the top, innovation culture, industry engagement, and mandate.