This paper synthesizes the evidence that the widespread adoption of digital payments in all their forms, including international and domestic remittances, can be instrumental in reaching the financial inclusion goals of the G20. It concludes that:
- Digitizing helps overcome the costs and physical barriers that have beset otherwise valuable financial inclusion efforts.
- Digital platforms offer the opportunity to rapidly scale up access to financial services using mobile phones, retail point of sales, and other broadly available access points, when supported by an appropriate financial consumer protection framework.
- Digital payments can promote women’s economic empowerment by facilitating greater account ownership and asset accumulation and increasing women’s economic participation. Digital payments, particularly by governments and employers, enable the confidentiality and convenience women require in financial services. Payments provided via an account can provide the on-ramp to financial inclusion and in many cases the first account that a woman has in her own name and under her control. Opening an account can be an important first step for introduction to the formal economy for an entrepreneur and can lead to formalization of her small business.
The first section of the paper reviews the benefits of digital payments for governments, recipients, and providers. Not only do digital remittances lower costs for the senders and recipients of payments, but they also increase access to the banking system, the privacy and transparency that they afford, and security throughout the system. This has the added advantage of giving a significant boost to women’s economic empowerment.
The next section explores the challenges that face countries around the world as they look to increase the use of digital remittances. For example, to put in place a robust system of digital payments requires significant physical infrastructure – not just mobile telecommunications, but also accessible cash-out points. Also, the literature shows that one cannot ignore the human element: New users of digital payments need to be educated about how to use them, the other banking options they open up, and how the overall system works, as well as why it should be trusted.
The third section offers suggestions for governments and the private sector on how they can facilitate the spread of digital payments within their countries and globally. Governments can lead by example, both by using digital payments themselves and by creating a regulatory environment conducive to digital innovation. The private sector can continue to innovate, invest in infrastructure, leverage public-private partnerships, and create and maintain convenient, reliable, and secure networks. And the international development community can act as both a resource of expertise and a facilitator of digital payment expansion, where appropriate.