2025 Broadband Advocacy Targets / Target 5
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 the Internet and extend access to the social and economic benefits of digital resources. 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 adults had access to a mobile phone, creating the potential for e-finance access, and with this, access to economic empowerment.
Tracking progress
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.
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. These digitalized services enable new and innovative businesses and interactions to thrive on a global scale, whereas in the past, they may have been constrained by a user’s physical location.
The ability to pay with a mobile phone, scanning a QR code or swiping an app-based credit or debit card facilitates greater access to financial services, access to payments such as for online shopping and receiving government disbursements, as well as access to credit such as loans. Not only are digital financial transactions generally more secure than cash, but they can also reduce close contact with other persons, an important consideration during the pandemic.
Transformative risks and opportunities
Opportunity to continue the pandemic-driven digitization effort with digital financial services, particularly in mobile money and cashless payments
The adoption of digital finance has grown sharply since 2017, mainly 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. This increase was also driven in part by developments in e-commerce leading many to making payments online. Cash on delivery, popular in developing countries, was discouraged due to fears of cash spreading the disease.
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 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 wanted to continue to do so after the pandemic. 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 ten 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.
The implementation of Digital Public Infrastructure (DPI) – open and technology infrastructure that enable access to public and private services at societal scale – can improve access to finance, expand access to new types of financial services such as digital payments, lead to inclusive economic growth, tackle corruption, and strengthen the economic resilience of households. A 2023 study by UNDP and Dalberg on the Human and Economic Impact of Digital Public Infrastructure estimates that the adoption of finance-related DPI can accelerate GDP growth by up to 33% in LMICs.
Opportunity to continue the pandemic-driven digitization effort with digital financial services, particularly in mobile money and cashless payments
Another opportunity to capitalize on is the enabling of payment of COVID-19 benefits by governments to digital accounts. Almost 60 governments in LMICs used digital payments for COVID-19 assistance. For example, 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.
While these programmes are rooted historically in a response to the COVID-19 pandemic, they built a strong foundation for further acceleration of digital finance and trade, spurring economic activity. For example, because of the impetus of needing digital finance during 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. Colombia also adopted the low-value payment system in 2020 with Decree 1692, which modifies Decree 2555 of 2010. The Decree aims to increase financial inclusion and facilitate access to the low-value payment system and its financial services. 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.
On a more practical front, Kenya replaced all insurance cards with biometric fingerprint identification in July 2021, reducing the possibility of insurance fraud and manual processing, and opening up the possibility of using the biometric-identity approach to increase further trust and authentication mechanisms in other national financial systems.
