Booming digital economy must still make space for cash, particularly for Asia’s unbanked masses
- Lockdowns and cash hygiene concerns amid the pandemic have fuelled an e-commerce boom, but going completely cashless risks financially excluding many and limits revenue opportunities for merchants
With the pandemic, businesses and governments around the world are stepping up efforts to discourage cash in favour of digital and contactless payments. There is a compelling case for moving towards an innovative, digital-first, cashless society, especially in Southeast Asia, to empower small businesses and citizens to access the global digital economy. But going completely cashless may lead to some unintended consequences.
There is no doubt that digital payments will become more entrenched and much faster than previously thought. In Singapore, the government has deployed 200 digital ambassadors to encourage stallholders in hawker centres and wet markets to adopt the Singapore Quick Response Code payment solution. Even multinational companies such as Citi and AXA are jumping on the bandwagon, rolling out a Dynamic PayNow QR Solution – using QR codes – to help policyholders pay their insurance premiums.
But does the rising tide of digital payments lift everyone? Or are there people for whom these changes could lead to a deeper financial exclusion?
02:40
How mobile payments impact people’s lives in China
The reliance on cash is not unique to Southeast Asia. Across Latin America, 38 per cent of shoppers are unbanked, and nearly one in five online transactions are completed with cash, as with Boleto in Brazil.
In Africa and the Middle East, only 50 per cent of consumers are banked, and 12 per cent have access to a credit card. In countries such as Kenya, where more consumers own a smartphone (60 per cent) than have a bank account (56 per cent), the prospect of an outright ban on cash payments could restrict access to their local economy, never mind the global economy.
E-payment is the latest in China’s long history of money innovations
Even in the US, about 6.5 per cent of households (14.1 million adults and 6.4 million children) are unbanked, exposing large numbers to any cash ban.
This is highlighted by the increase in e-commerce transactions completed using cash-based payments that the PPRO transaction engine has seen during the pandemic. Many consumers around the world continue to rely on cash-based payments, even when shopping online. At the checkout page, consumers are given a bar code, QR code or simple number sequence for their order. They take this “ticket” (either printed or on their mobile device) to a local convenience store or bank and pay in cash. At that point, the goods are shipped.
Cashless protocols restrict not only consumers’ access to goods and services, but also limit revenue opportunities for merchants. More than ever, we hear payments professionals cry that “cash is dead”. But while 2020 has provided the global economy with one great reason to reduce the acceptance of cash, the payments industry has billions of reasons to continue offering multiple options that cater to the needs and preferences of every shopper around the world.
Tristan Chiappini is vice-president and head of partnerships in Asia-Pacific at PPRO, a specialist for local payment methods and value-added services
David Dodwell is on holiday