Quick Win No. 10
Finance re-globalization and resilience through the adoption of digital payments
For decades, development finance has played a critical role in supporting financial resilience in developing countries. However, even countries that are striving to increase their economic strength remain vulnerable to external macroeconomic shocks and geopolitical uncertainties. One way development finance can help shield developing economies from shocks and drive inclusive growth is by championing the adoption of digital payments—including open and competitive payments markets and public-private partnerships.
Digital payments are a key driver of economic development and inclusive growth. Great progress has been made this past decade to promote financial inclusion and digital payments. According to the latest World Bank Global Findex in 2021, 71% of adults in developing countries have a formal financial account, compared with 42% in 2011, and 57% make or receive digital payments, compared with 35% in 2014. Mobile payment solutions have transformed financial access across Africa, Latin America, and the Asia-Pacific, empowering millions of individuals to engage in economic activities. Digital wallets and other innovative payment solutions have enabled money transfers and remittances to support communities during crises like Covid-19. In addition, superapps, such as Ukraine’s DIIA, offer digital IDs, access to government services, and facilitate payments. Other superapps have enabled millions of consumers and merchants to connect, buy and sell goods and services, and transact efficiently.
Digital payments are a critical on-ramp to accessing increasingly digitized public and private services. However, 1.4 billion individuals remain “unbanked,” many of them women and minority groups in remote or under-served areas. Access to basic transactional accounts is only the first step to prosperity in the digital era; people and businesses that are banked need accessible and transparent cross-border payment solutions to benefit from remittances and global e-commerce. Open and competitive payments systems are key to accelerating developing countries’ path to a broad-based use of digital and cross-border payments. Open ecosystems encourage innovation, promote positive customer experiences, and drive efficiency; when providers compete for customers, they are incentivized to develop new technologies and services that ultimately improve the consumer experience.
Development finance institutions play a critical role in promoting regulatory frameworks that encourage competition and level playing fields for participants in the payments system in developing countries. They can also enhance cybersecurity and consumer trust in the digital economy through policy frameworks and technology solutions that protect consumers’ data, money, and identity. When investing in initiatives that promote payment solutions in developing nations, development organizations can ensure that new initiatives are globally interoperable, well-governed, sustainable, and aligned with broader economic goals.
Furthermore, development organizations can partner with private sector providers to promote the use and acceptance of secure, transparent, and reliable digital payments and global cross-border payment capabilities. Public and private sectors can also promote regulatory frameworks that enable practical initiatives for digital literacy, the access of low-income populations to technology, and small businesses’ access to globally ubiquitous payment networks. Millions of people and businesses in developing countries have yet to join the global digital economy. This is a huge unrealized opportunity for economic growth, trade, and resilience—and one that can be unlocked through open and competitive payments systems.
