The move to digital money – why efforts around the world are ‘patchy’

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The rise of digital technology is one of the biggest opportunities for the financial sector to increase its reach and bring services to populations that were previously underserved by the banking industry. Improvements in areas such as mobile connectivity and online offerings help ensure that more people than ever have access to finance around the world.

However, the implementation of such solution is not always plain sailing. And a new report from Citi and Imperial College London highlights just how much work there is still to do in order to bring digital money solutions to the unbanked and underbanked.

Progress ‘patchy’, report finds

The organizations’ latest Digital Money Index evaluated 90 countries to assess their readiness for the adoption of non-cash payments, looking at factors in four key pillars, which are: the level of support on offer from governments and the industry; financial and technology infrastructure; the number of digital options available; and how likely citizens are to adopt these services.

Overall, it found that progress towards digital readiness has progressed only slightly since 2014. But more worryingly, it noted a larger gap is emerging between the best-performing nations and those at the bottom of the index. It found that while leading countries have seen their readiness improve by an average of three percent over the last few years, for those at the other end of the scale, this figure was just 0.5 percent.

Greg Baxter, global head of digital at Citi and co-author of the report, said: “The efficiencies and cost savings of moving to digital money are potentially staggering. And the social benefits from wider financial inclusion enormous.”

He therefore stated it is a “concern” that the Index suggests some low-income countries – as well as potentially even low-income segments within developed countries – could fall “irretrievably behind in the digital economy”.

Where is the best progress being made?

The good news is that the Index highlights several examples of emerging economies that have made good progress towards digital money readiness. These include Bangladesh, which improved its readiness score by eight percent compared with last year.

While the Asian nation is still an overwhelmingly cash-based economy, 90 percent of government-to-business payments have transitioned to digital channels, while 69 percent of the value of payments made by the government are digital. Mobile adoption has also enjoyed a boom, with the value of mobile transactions growing by 37 percent in 2016 to reach a yearly total of $24 billion.

Elsewhere, the Index also highlighted Tanzania – which it described as one of the world’s most advanced P2P mobile money countries, along with its neighbor Kenya – and Vietnam, where adoption of digital POS terminals has been growing at double-digit rates in the last few years.

More holistic approaches needed

However, the report noted that even where progress has been made, developments are often opportunistic rather than based on a holistic, structured plan, while weaknesses still exist in even the best-performing countries.

The Index stated that the journey to digital money is a one that can only be completed successfully with concerted action across the four pillars, and there are no shortcuts.

“No-one is saying it is easy. But it does seem that developing countries have some salutatory lessons to offer even the world’s digital money leaders,” Mr Baxter said. “Go back to basics, ensure there is true interoperability, incentivize the unbanked and underbanked and do not forget the power of evangelism.”

Written by Andy Brown

Andy Brown

Andy is marketing director for payments at NCR. He has nearly 30 years' experience in e-payment systems from the delivery and support of systems in the Far East and Europe, from both the product management and marketing perspectives. Based in the UK, Andy is responsible for marketing NCR payment solutions.

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