2025 Broadband Advocacy Target 5
INCREASE USE OF DIGITAL FINANCIAL SERVICES
By 2025, 40% of the world’s population should be using digital financial services
Digital financial services present a tremendous opportunity to swiftly increase the number of people using broadband and the Internet and in doing so, give access to the social and economic benefits of these digital resources and the online marketplace.
In 2018, when the Commission first began tracking this target, 2 billion adults did not have access to a bank account, and yet 1.6 billion of them had access to a mobile phone, creating the potential for e-finance access, and with this, access to economic empowerment.
As with other digitally-enabled services that improve daily life, digital financial services, or e-services, have been heavily utilized during the COVID-19 pandemic for payment of transactions as well as to avoid unnecessary face-to-face interactions. These digitalized services enable new and innovative businesses and interactions to thrive on a global scale where in the past they may have been constrained by their physical location.
The ability to pay with a mobile phone, scanning a QR code or swiping a credit or debit card facilitates greater access to financing, shopping and government services. Not only is it more secure than cash, but digital transactions also reduce close contact with other persons, an important consideration during the pandemic.
According to the latest data from the World Bank’s Findex survey, 64 per cent of people aged 15 years and older made and/or received digital payments in 2021. This figure exceeds the target of 40 per cent on a global basis. While low-income, lower-middle income countries and South Asia have not yet reached the target, they remain on track to achieve it by 2025.
Made or received digital payments in the past year (% age 15+)
Digital finance adoption has grown sharply since 2017 particularly due to COVID-19. According to the World Bank, the pandemic led to an increase in digital financial services: four in 10 people in developing economies (excluding China) made a digital payment for the first time after the start of the pandemic. The increase was driven by a number of factors. E-commerce led many to making payments online. Cash on delivery, popular in developing countries, was discouraged due to fears about cash spreading the disease. Another factor was the payment of COVID-19 benefits by governments to digital accounts. Almost 60 governments in LMICs used digital payments for COVID-19 assistance. In Paraguay, some 300 000 people were reached with emergency assistance through transfers from the government using telecommunication operators’ mobile money platforms. Among adults in Argentina who received government transfers nearly half of recipients received them digitally for the first time during the pandemic; in Mexico, the share was nearly a fifth. In Latin America as a whole, 11 per cent of the population (almost 50 million individuals 15 years and older) started using digital payments for the first time in 2020 amid COVID-19; about half plan to continue to do so after the pandemic. Some countries have also adopted a new regulatory framework to enable the uptake of digital finance, such as Mauritania, which adopted a draft law related to electronic payment services in June 2021. Similarly, in Indonesia, the issuance of Presidential Regulation No. 114 in 2020 on the National Strategy for Financial Inclusion that covered “improved digital financial products and services” has provided an impetus to accelerate Indonesia’s financial inclusion.
In 2021, there were more than 1.35 billion registered mobile money accounts worldwide, a tenfold increase from 134 million in 2012. Year-on-year growth in new registrations continues, defying initial expectations that it would taper off. Demand for mobile financial services is likely to remain high among financially excluded and often marginalized populations. However, even among registered account holders, about 1 billion are not active on a monthly basis, representing an important opportunity for the industry to deepen financial inclusion and economic participation.
The volume of cashless payments rose during the pandemic with contactless payments increasing to its highest rate since 2015 with many card companies raising the daily limit on contactless payments. While demand for large size cash denominations increased, this was more due to the use of cash as a store of value rather than for payments. A European Central Bank survey found that 87 per cent of the respondents who had made fewer payments in cash during the pandemic would continue to do so when the coronavirus crisis is over. The Bank for International Settlements finds that COVID-19 has accelerated the drive among central banks to launch digital currencies.
Even though the COVID-19 pandemic had a negative impact on most economic sectors that require physical interaction, the number of mobile money agents has continued to rise. Between 2012 and 2021, the number of active agents multiplied more than 10 times, from 534 000 to 5.6 million. There is a clear trend towards a more digitized mobile money ecosystem as more cash is converted into e-money and either continues to circulate as such or is spent digitally rather than being cashed out.