Expanding the use of digital payments such as mobile money and electronic transfers in developing countries could spur economic growth and ease income inequality, while advancing towards the G20’s goal to bring financial services to an estimated 2.5 billion adults who are excluded from the formal banking sector.
Building on a telecoms revolution that has connected many of the world’s poor people to mobile banking services, a report published on Thursday argues that governments in the G20 should target digital payments as a way to help people access basic banking facilities, which it says will encourage saving while reducing theft and corruption.
The report – The Opportunities of Digitising Payments – by the World Bank’s development research group, the Better Than Cash Alliance and the Bill and Melinda Gates Foundation, says: “Rapid development and extension of digital platforms and digital payments can provide the speed, security, transparency and cost efficiency needed to increase financial inclusion at the scale required to achieve G20 goals.”
Digital payment services such as Kenya’s M-Pesa mobile money, prepaid debit cards for Syrian refugees in Turkey, and electronic bank transfers are helping people save money securely in formal banks, said Ruth Goodwin-Groen, managing director of the Better Than Cash Alliance.
“When we’re looking at the large emerging economies in the G20 – the Indonesias, the Brazils, the Mexicos – there are huge opportunities in those economies to transition their cash payments to electronic payments,” she said. “But what works in each context is what is appropriate – it depends on the country you’re looking at.”
Some are concerned that digital payments are vulnerable to electronic theft and can be intercepted. Last year, Barclays attempted to close the accounts of remittance company Dahabshiil, whixh operates in Somalia, for fear that funds sent electronically could be intercepted by Islamist group al-Shabaab.