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FDATA North America Submits 2025 Pre-Budget Submission to Canadian House of Commons’ Standing Committee on Finance

Contact: Laine Williams, (202) 897-4757,  [email protected] 

July 26, 2024, Washington, DC – The Financial Data and Technology Association of North America (FDATA) submitted to the Canadian House of Commons’ Standing Committee on Finance (FINA) its recommendations in advance of the 2025 budget. Our submission emphasized the need for the rapid and well-governed implementation of Canada’s open banking system and the expansion of open banking into an open finance framework to drive innovation and competition in the financial sector.

We urged the Canadian government to:

  • Include language in Budget 2025 to ensure the implementation of Canada’s open banking system, allowing both consumers and small business owners to have full access to its benefits and prioritizing the growth of Canada’s innovation economy.
  • Outline the government’s approach to open finance, the next logical step in financial services. Budget 2025 should establish a timeline for expanding the framework to include additional types of financial accounts, ultimately encompassing any financial account controlled by a consumer or small business.
  • Ensure that the Financial Consumer Agency of Canada (FCAC) governs the system in a manner that does not inadvertently dissuade smaller entities from participating.

In the submission, FDATA highlighted that Budget 2024’s delivery of Canada’s initial CDB framework marked an important milestone in a long, consultative journey. Budget 2025 should both ensure delivery of open banking in line with the government’s and the market’s expectations and build on this important progress, including unambiguously making small business accounts part of the first phase and ensuring that the FCAC’s enforcement of the system is appropriately tiered based on the size, complexity, and use case of participating entities.

A full copy of the submission is available here.

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FDATA North America Responds to the CFPB’s BNPL Interpretive Rule

Contact: Laine Williams, (202) 897-4757, [email protected] 

July 24, 2024, Washington, DC– The Financial Data and Technology Association of North America (FDATA), a trade association representing more than 30 financial technology companies and consumer-permissioned data access platforms in Canada and the United States, today submitted a comment in response to the Consumer Financial Protection Bureau’s (CFPB or Bureau) interpretive rule classifying Buy Now, Pay Later (BNPL) loans as Regulation Z-regulated products under the Truth in Lending Act (TILA).

FDATA North America commended the CFPB for classifying BNPL loans as Regulation Z-regulated products under the TILA, which will ensure that these loans are considered “covered data” under the Bureau’s forthcoming final rule implementing Section 1033 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Section 1033). The Section 1033 rule will allow consumers to share their balance and transaction information across credit card, checking, and savings accounts with third-party financial providers of their choice, ensuring greater financial transparency and empowerment. The designation of BNPL loans will enable consumers to make more informed financial decisions and manage their finances more effectively when considering applying for, utilizing, and servicing BPNL loans.

As the leading trade association that has long advocated for the inclusion of all consumer financial accounts under the CFPB’s Section 1033 rule, FDATA North America supports this incremental step towards a more expansive Section 1033 rulemaking. FDATA North America encourages the Bureau to continuously broaden the types of accounts covered under its Section 1033 rulemaking over time, ensuring that all consumers can access and share their financial data digitally and benefit from important protections when they do so.

A full copy of the letter is available here.

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FDATA North America July Newsletter

FDATA North America Monthly Newsletter for July 2024

Welcome to FDATA North America’s monthly newsletter! These regular dispatches will share developments from our organization and our 30+ member companies, all of which are promoting financial access and inclusion with open finance use cases. We also include a list of upcoming industry events, and coverage of any market developments that impact fintech innovators. Know someone who’d like to receive these monthly updates? Send them here to sign up.

FDATA North America News

FDATA North America Sends Letter to Missouri Regulator to Support Consumer-Permissioned Data Access. On June 20, 2024, the Financial Data and Technology Association of North America (FDATA) sent a letter to Missouri Secretary of State Jay Ashcroft in response to warnings issued by the Missouri Securities Division. These warnings, sent on May 23, 2024, to over 40 state-registered advisors, raised concerns about the use of clients’ log-in credentials to access financial information with client consent. FDATA North America’s letter emphasized the importance of allowing financial advisors to access and review clients’ financial information for providing informed recommendations that improve financial outcomes for Missourians. They highlighted the negative impact of the Division’s warning, which discourages the use of third-party tools that enhance clients’ investment and financial outcomes. FDATA North America reiterated its commitment to data privacy and information sharing, advocating for secure consumer-permissioned data access. They urged the Missouri Securities Division to consider mandating secure interfaces for consumer-permissioned data access for retirement and securities accounts, in alignment with forthcoming federal rules by the Consumer Financial Protection Bureau, ensuring consumers can safely share their financial data with third parties. FDATA released a statement on its submission of the letter, which can be found here.

Member News & Activity

Basis Theory published a blog highlighting how connected payments help improve margins and reduce risk for merchants. Connected payments allow merchants to implement a logical layer between purchase requests and transaction submissions, enabling flexibility, improved fraud detection, and reduced risk, ultimately enhancing profitability and ensuring secure, continuous improvement of their payment systems.

Codat published a blog explaining how their bank transaction categorization engine works to improve decision-pmaking and efficiency in business lending by automating and accurately categorizing transactions. By leveraging real business data and integrating banking and accounting information, Codat’s engine helps lenders enhance data accuracy, streamline operations, and make more informed lending decisions.

Envestnet posted a new podcast episode on Data Driven Finance featuring Steve Boms, Founder & President at Allon Advocacy, discussing regulations in financial services. Key highlights include regulation readiness for open banking, key metrics for connected finance, and reassurances consumers need when sharing data.

Fiserv published an article discussing how financial institutions can combine self-service convenience with personal attention to satisfy consumers in the age of digital banking. By evolving and automating branches, financial institutions can balance delivering personal attention with providing self-service capabilities, ultimately improving efficiency, customer satisfaction, and revenue growth.

Flinks posted a blog announcing that Flinks Pay now supports Electronic Funds Transfers (EFTs) and has introduced an improved payment workflow that unifies the experience from onboarding to account activation. By providing a single, seamless workflow for validation, authorization, and payment setup, Flinks Pay helps Canadian lenders and borrowers manage their payments efficiently, reducing manual processes, minimizing fraud risk, and enhancing overall operational efficiency.

GoCardless was featured in the Summer edition of Financial IT Magazine, where CPO Andy Wiggan addresses whether open banking was overhyped, the potential for bank payments to compete with cards, and what it will take for VRPs and commercial use cases to achieve unanimous success.

MX’s Jane Barratt attended the Fifth Workshop on Credit Card Lending, Consumer Finance, and the AI Revolution on June 27–28, 2024. The Federal Reserve Bank of Philadelphia and the Supervisory Research and Policy Forum (SURF) organized the workshop, providing a platform for regulators, industry experts, and academics to discuss key topics shaping the consumer finance industry, including innovations in open banking, payment networks, data privacy, and the impact of ML/AI on consumer lending.

Plaid was featured in a Fast Company article highlighting its new Plaid Layer technology, which simplifies the process of signing up for financial accounts and linking bank accounts to just 15 seconds. This innovative solution allows users to set up accounts with compatible financial services using stored data, significantly reducing the time and effort required for onboarding and boosting user conversion rates by up to 25%.

Events and Submission Deadlines

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FDATA North America Sends Letter to Missouri Regulator to Support Consumer-Permissioned Data Access

Contact: Laine Williams, (202) 897-4757, [email protected] 

June 20, 2024, Washington, DC – The Financial Data and Technology Association of North America (FDATA), a trade association representing more than 30 financial technology companies and consumer-permissioned data access platforms in the United States and Canada, today sent a letter to Missouri Secretary of State Jay Ashcroft in response to warnings the agency sent to state-registered advisors regarding potential investor harm associated with advisors’ use of technology-based tools to help manage their clients’ portfolios.

The Missouri Securities Division on May 23, 2024, sent warning letters to more than 40 state-registered advisors raising concerns about advisors using clients’ log-in credentials to access financial information with client consent.

In its letter, FDATA North America emphasized that allowing financial advisors to access and review clients’ financial information is essential for providing informed recommendations that improve financial outcomes for Missourians. FDATA North America also highlighted the potential negative impact of the Division’s warning, which discourages the use of third-party tools that can enhance clients’ investment and financial outcomes. FDATA North America reiterated its commitment to data privacy and information sharing while advocating for secure consumer-permissioned data access and urged the Missouri Securities Division to consider mandating, in alignment with forthcoming federal rules by the Consumer Financial Protection Bureau, the promulgation of secure interfaces for consumer-permissioned data access for retirement and securities accounts, ensuring that consumers can safely share their financial data with third parties.

A full copy of the letter is available here.

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Finexos’s Darren Smith on Financial Inclusion

Increasing financial inclusion is vital in supporting the financial wellbeing of individuals and SMEs and to drive economic growth.

In the UK, the government plays a crucial role in enabling financial inclusion. For example the House of Commons Treasury Committee Inquiry into SME Finance, the establishment of the Centre for Finance, Innovation and Technology (CFIT) last year, as well as the UK’s Economic Secretary’s announcement of a new industry-led Open Finance Taskforce focused on how financial data can be safely unlocked to improve SMEs’ access to credit.

By leveraging open banking data, and other alternative data sources, we can improve inclusion by assessing creditworthiness for those who may not have traditional credit histories. Analysing real-time financial data such as income, spending patterns, and banking transactions allows lenders to make more accurate lending decisions and extend credit to individuals who were previously underserved or excluded from traditional financial services.

HMRC tax data can also improve lending decisions for SMEs by 25%, as demonstrated in the recent CFIT proof-of-concept led by HSBC. The trailblazing Financial Conduct Authority (FCA) makes it possible to test these novel approaches through their Innovation Hub’s Permanent Digital Sandbox, Innovation Pathways and Regulatory Sandbox services.

Lastly, financial inclusion can be undoubtedly propelled further through new technologies that improve access to financial services for individuals in remote areas, streamline the application process for loans and credit, and enable more accurate assessment of creditworthiness for underserved populations. From mobile banking apps to digital payment platforms, as well as artificial intelligence for alternative credit scoring, there is exciting tech that can expand financial inclusion and improve financial wellness and resilience.

Darren Smith

Executive Director Finexos, an FDATA Europe Member

 

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FDATA North America June Newsletter

FDATA North America Monthly Newsletter for June 2024

Welcome to FDATA North America’s monthly newsletter! These regular dispatches will share developments from our organization and our 30+ member companies, all of which are promoting financial access and inclusion with open finance use cases. We also include a list of upcoming industry events, and coverage of any market developments that impact fintech innovators. Know someone who’d like to receive these monthly updates? Send them here to sign up.

FDATA North America News

FDATA North America Sends Letter to CFPB Advocating for Distinction Between Digital Wallets and Passthrough Payment Platforms. On May 2, 2024, the Financial Data and Technology Association of North America (FDATA) sent a letter to the Consumer Financial Protection Bureau (CFPB or Bureau) addressing concerns in the Bureau’s approach to digital wallets and passthrough payment platforms in both its Notice of Proposed Rulemaking (NPRM) on Personal Financial Data Rights and its NPRM on Defining Larger Participants of a Market for General-Use Digital Consumer Payments. In the letter, FDATA NA critiqued the CFPB’s approach for not distinguishing between digital wallets, which hold consumer assets, and passthrough payment platforms, which facilitate transactions through other financial institutions. FDATA NA argued that this lack of distinction could lead to regulatory inefficiencies, consumer confusion, and stifled innovation. FDATA NA’s letter advocated for more tailored regulations that reflect the unique functions of digital financial services, emphasizing the need to exempt passthrough platforms from certain regulatory burdens to protect innovation and ensure precise, effective consumer protections. FDATA released a statement on its submission of the letter, which can be found here.

FDATA North America Responds to the Bank of Canada’s Retail Payments Supervision Consultation. On May 21, 2024, the Financial Data and Technology Association of North America (FDATA) responded to the Bank of Canada’s Retail Payments Supervision Consultation regarding its new supervisory guidelines for payment service providers (PSPs). Representing over 30 financial technology companies and consumer-permissioned data access platforms in Canada and the United States, FDATA expressed broad support for the Retail Payments Activities Act (RPAA) regulations while requesting additional clarity. FDATA emphasized that implementing the RPAA regulations will establish a robust regulatory framework for up to 2,500 PSPs, significantly advancing Canada’s financial services modernization. The association highlighted the importance of including payment use cases in Canada’s consumer-driven banking framework to align with other G7 nations. In its detailed response, FDATA addressed key aspects of the draft supervisory guidelines, such as urging comprehensive due diligence for outsourced service providers, flexible compliance standards, clear thresholds for different types of PSPs, and an extended 24-hour reporting period for material breaches. It also proposed reporting incidents solely to the Office of the Privacy Commissioner to reduce duplicative reporting and requested clarity on the definition of “holding funds,” recommending the exclusion of firms that facilitate transactions without holding funds. Additionally, FDATA called for explicit criteria for changes warranting notification, particularly for cloud migration. FDATA released a statement on its submission of the letter, which can be found here.

Member News & Activity

ByAllAccounts published a blog on designing open banking experiences for delegated access, highlighting the importance of accommodating complex relationships outside the current third-party data-sharing models. The blog discussed how ByAllAccounts is working with financial institutions and industry standards bodies to support consumer relationships with financial advisors, trustees, and guardians within the new open banking frameworks.

Basis Theory published a blog on the different types of payment tokens: universal, PSP, and network tokens, highlighting how each type masks sensitive payment data to improve security and streamline payment processing. The blog emphasized that while universal tokens offer the highest level of security and flexibility across various payment systems, PSP tokens are convenient for single-provider setups, and network tokens are specific to card networks, making them less versatile.

Betterment was featured on The Balancing Act which covered how Betterment’s combination of human expertise and technology makes it easy for consumers to invest. Watch the full segment here.

Envestnet launched a podcast featuring Farouk Ferchichi, Group President of Envestnet | Yodlee, discussing his fintech entrepreneurial background and its application at Envestnet. The episode covered topics such as internal transformation, data democratization, financial wellness, customer needs, and the role of AI in financial management and advisement.

Experian published a press release announcing the launch of Cashflow Attributes™, a solution aimed at expanding credit access for underserved consumers by integrating over 900 income, cashflow, and affordability attributes into lending decisions. This tool leverages banking data to provide a more comprehensive view of a consumer’s financial health, potentially improving predictive accuracy by up to 20% and supporting financial inclusion for nearly 106 million U.S. consumers who struggle to secure credit at mainstream rates.

Fiserv posted an article about Finxact, a next-generation banking platform designed for flexibility and scalability in banking, fintech, and embedded finance. Finxact’s open, API-first architecture allows financial institutions to offer personalized digital experiences and integrate seamlessly with other technologies, providing enhanced data access and real-time transaction processing.

Flinks published a blog highlighting the pivotal role of Electronic Funds Transfers (EFTs) in Canada’s shift towards a cashless economy, accounting for 59% of total payment value in 2022. The blog discussed how EFTs provide secure, efficient, and convenient digital transactions, transforming financial operations for individuals and businesses while addressing challenges such as privacy, digital access, and the transition from traditional cash use.

GoCardless was featured in Payments Dive in an op-ed discussing how Pull-ACH can help finance leaders reduce costs and increase revenue by automating payment processes. The piece highlighted the advantages of Pull-ACH, including faster payment receipt, lower transaction fees, reduced failed payments, and improved cash flow management, making it a vital tool for businesses aiming to future-proof their payment systems.

MX published a blog advocating for Open Finance, emphasizing the benefits of accessible and actionable financial data for consumers. The blog highlighted key statistics showing that a significant majority of consumers desire a consolidated view of their finances, personalized financial services, and secure data connectivity, supporting the need for an open finance ecosystem as formalized by U.S. and Canadian governments.

Plaid published a blog announcing new solutions to help customers prepare for the upcoming U.S. open banking regulation, known as the CFPB’s 1033 rule, which will ensure consumers have control over their financial data. They introduced an open banking readiness toolkit and the Data Transparency Messaging tool, which provides detailed information about data usage and simplifies compliance with new authorization and data retention requirements.

Trustly published a press release announcing a partnership with PayNearMe to integrate Trustly’s Open Banking solution into PayNearMe’s MoneyLine™ platform. This collaboration will enhance iGaming and Online Sports Betting by enabling real-time ACH deposits and withdrawals, improving user experience and reducing operator risk.

Events and Submission Deadlines

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FDATA’s Walter Pereira on Financial Inclusion

Open Finance has been used as a promising avenue to enable financial inclusion for millions of Latin Americans, especially in countries like Brazil, Chile, and Colombia, which have made significant regulatory advancements.

In Chile, for example, the Comisión para el Mercado Financiero (CMF) has been actively working to implement regulations that favor Open Finance. The recently approved Fintech Law establishes a clear regulatory framework for integrating new digital financial services, promoting competition and innovation.

In Colombia, the Financial Superintendency has launched a series of initiatives to strengthen the Open Banking infrastructure. Colombian regulation has focused on ensuring consumer data security and privacy while facilitating collaboration between traditional banks and fintechs. This can create a more inclusive environment where more people can access modern and efficient financial services.

An essential pathway for the success of these data-sharing infrastructures will be instant payments, which will enable inclusion and the creation of more data on users’ financial behavior, allowing the development of more use cases. Pix in Brazil, for example, was efficient in this approach, including more than 75 million people and generating more behavioral data about users.

Brazil has stood out in use cases in the region thanks to the advanced framework implemented. What is essential for the success of this infrastructure is precisely the creation of use cases, and we can already see the industry innovating from it. For example, Palenca is allowing financial institutions to access gig economy data for credit evaluations. This is particularly relevant in a market where many workers do not have formal income and, therefore, have difficulty accessing traditional financial services. Banco do Brasil has also implemented solutions that allow users to better aggregate and manage their financial information, helping them better understand their financial situation across different accounts. Another relevant case is BBVA, which, through the analysis of financial transactions via Open Finance, had a significant social impact. After Hurricane Odile in Mexico, BBVA helped the Mexican government identify which regions were recovering more slowly, allowing for more effective and targeted resource allocation.

Open Finance is proving to be a powerful tool for financial inclusion in Latin America, not only by including more people but also by making the Latin American financial system more efficient. With recent advancements in Chile and Colombia and the interest of countries in the region in adopting instant payments, we will likely see more relevant use cases in Latin America. Open Finance has immense opportunities, and the main one is to ensure that those who did not participate in the financial system have the opportunity to benefit from it.

Walter Pereira

FDATA LATAM REgion Director

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Ozone’s Huw Davies on Financial Inclusion

Financial inclusion remains a global challenge, with millions lacking access to vital financial services. Yet, within this challenge, lies an opportunity for innovation and collaboration. At Ozone API, we see open banking as pivotal in fostering financial inclusion worldwide. And it’s not just us that thinks so. A number of regulators are putting financial inclusion objectives at the heart of open banking and open finance frameworks. Done well it can create the right conditions to drive significant societal impact. Regulations must however be defined in a way that balances innovation with consumer protection and data privacy.

Put simply, open banking helps to remove some of the very real and significant barriers to financial inclusion. Through access to customer permissioned data, lenders can make more informed decisions, enabling previously excluded groups to get access to credit. It also creates the conditions which allow innovative providers to more effectively target underserved segments. Combining their specialist sector focus with the power of traditional banking and using partnerships to drive better solutions. And finally it helps reduce the cost and friction of payments, ensuring digital payment solutions can spread to more parts of society.

Open banking revolutionises access to banking services, especially in regions like Latin America where cash transactions dominate due to high card payment costs and traditional credit bureaus lack insight into large sections of the population. Additionally, open banking addresses credit history challenges, enabling rapid credit profile building for gig workers in regions like the Middle East. This unlocks access to financial services and empowers individuals to achieve financial goals.

Cross-border collaboration and data sharing among regulators are key to the future of financial inclusion. Enabling consent-based access across jurisdictions allows individuals to use their open banking-based credit history globally, though challenges like regulatory alignment and data privacy persist.

Timely regulatory interventions are crucial to accelerate financial inclusion. Prioritising regulations, facilitating data sharing, promoting interoperability, and safeguarding consumer rights will foster an inclusive environment that encourages innovation and expands financial access for all.

Technologies like open banking, digital payments, and blockchain propel financial inclusion by lowering costs and improving access to credit. Conversely, technologies exacerbating exclusion, such as restrictive data practices, must be re-evaluated to align with inclusivity and affordability principles.

In conclusion, advancing financial inclusion demands collective efforts from stakeholders. At Ozone API, we’re committed to leveraging our expertise, our technology and partnerships to drive change and create a more inclusive financial future for all. Specifically, we help regulators develop the rules and standards needed to enable a secure open finance ecosystem. We also provide robust, proven open finance infrastructure to banks and financial institutions, to reduce the time and cost of implementation, thereby speeding up the benefits of addressing critical challenges such as financial inclusion.

Huw Davies

Co-founder & Co-CEO of Ozone API an FDATA Global Member

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FDATA’s Ghela Boskovich on Financial Inclusion

Empowering individuals with the ability to share their data can absolutely improve financial inclusion, especially fairer access to credit for vulnerable underserved communities. We talk a lot about thin-file or no-file credit history customers being brought into the fold by using transaction data to assess behavioural and affordability risk; we’ve seen considerable expansion in loan approval and credit worthiness for those who had previously been excluded once they were able to share their open banking data.

But what if one could share their employment data, or government benefits data, when assessing affordability? What if there were a bigger picture that shed a different light on whether or not a candidate were a default risk? Being able to share tax data or vulnerability characteristics can change a no to a yes for certain types of underserved or excluded groups. Open finance and open data are formalised frameworks that enable this type of safe, secure, and consent/permissioned intelligence exchange. Making a variety of alternative data mobile and sharible for those who don’t have a deep history of traditional financial data means a chance to actually GET more traditional financial products and services.

Open data can literally open up inclusion.

Ghela Boskovich

FDATA Region Director Europe

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FDATA’s Steve Boms on Financial Inclusion

From a North American perspective, financial inclusion is a critical issue that hinges on the balance of robust regulatory frameworks, consumer protection, and innovation in financial services. In Canada, financial inclusion has been significantly shaped by the government’s initiative towards an Open Banking regime as announced in the 2024 Budget. The 2024 Budget was powered by the vision that consumers and small businesses should exert full control over their financial data. It paints a picture of an ecosystem where tailored financial products and services aren’t just a possibility but a standard. The Consumer-Driven Banking Framework established by the Canadian government is set to enhance financial inclusion through meticulously designed policies. For instance, it permits applications that develop credit scores, aiming to boost financial outcomes for “credit invisibles.” This strategy not only safeguards consumer data but also fosters innovations that dismantle barriers to access.

In the United States, the Consumer Financial Protection Bureau’s (CFPB) Section 1033 rulemaking is illustrative of a paradigm where consumer rights to access their financial data are placed at the heart of financial inclusion. This regulation, a component of the Dodd-Frank Act, is anticipated to unleash a wave of fintech innovations, thereby expanding the reach of financial services to historically underserved communities. This rulemaking envisions an inclusive financial sector where information is democratically available, allowing for a competitive environment that could lower costs and improve services for consumers.

Both Canada’s and the United States’ approaches underscore the importance of defining financial inclusion not just in terms of access but also in the quality of engagement between consumers and financial services. Use-cases and technologies that have been pivotal include digital identity verification, mobile banking, and personalized financial management tools. These innovations are instrumental in removing traditional barriers, like the need for physical bank branches in rural or low-income urban areas, thus changing the geography of financial services.

However, with innovation comes the challenge of ensuring equitable access and guarding against digital divides that could perpetuate or even exacerbate exclusion. In this regard, both countries are at a juncture where the question isn’t just which technologies should be embraced but how they can be deployed responsibly. As regulations like Canada’s Consumer-Driven Banking Framework and the United States’ Section 1033 come to fruition, a vigilant and adaptive approach is needed—one that continuously assesses the inclusivity of these innovations and the unforeseen barriers they may create. Moving forward, it’s crucial that both nations continue to foster environments where technology serves as a bridge rather than a gatekeeper to financial inclusion.

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