Developing countries investing more in e-payments

MANILA, Philippines - Governments in many developing countries, including the Philippines, will speed up their investments to promote electronic payments, followed by changes in payment laws and regulations this year.

“This should be a significant driver and one of the growing trends to supporting financial inclusion,” the Alliance for Financial Inclusion (AFI) said in a report. The AFI is a global network of financial inclusion policymakers. Its core mission is to encourage the adoption of inclusive financial policies in developing nations, to lift 2.5 billion citizens worldwide out of poverty.

AFI senior policy adviser and principal author of the report John Owens said that these commitments to adopt electronic payments should see an impact in markets such as Bangladesh, India, Indonesia, the Philippines, Nigeria, Brazil, Mexico, Russia, China, Malaysia, Thailand, Afghanistan, Kenya, Malawi, Rwanda, Ghana, Senegal, Peru, Colombia, Ecuador and Uruguay.

“We have noted quite a few interesting trends both on the technology side and the policy side that should have a direct impact on advancing financial inclusion through digital means this year,” Owens said.

The alliance expects changes in retail payment laws and regulations on the opening of markets to new financial players as well as new rules that will govern the supervision and oversight of payment systems.

Another trend is that new investments and joint ventures by banks, payment providers, mobile network operators, social media companies and large distribution networks would drive a new convergence focus on the use of digital means to promote financial inclusion.

AFI also noted the involvement of global payment providers like Visa and MasterCard in providing opportunities for governments and more players to offer payment services including microfinance institutions (MFIs) and credit cooperatives.

Owens said that both players are already making significant investments in financial inclusion such as MasterCard Center for Financial Inclusion, and continued focus of Visa on the area of financial inclusion.

In the Philippines and other nations with high remittance transactions will likewise see strong government initiatives in the electronic payment space, as well as stronger and numerous partnerships in lowering the costs of remittances.

The Philippines is one of the leading countries with strong remittance inbound transactions, with inflows accounting for nearly 10 percent of gross domestic products (GDP).

These development and trends should push for more competitive financial service alternatives like e-money and mobile channels.

This will be especially important in Africa which has some of the most expensive cross border remittance corridors in the world and which already witnessed the power of mobile-enabled cross border remittances with costs coming down in Tanzania and Rwanda from an average of 12 percent to just five percent in 2014.

Meanwhile, smartphone penetration rates have dramatically increased in 2014 and will create new opportunities as well as challenges, especially in markets where mobile payments have been set up to operate largely on feature phones.

“This trend will provide new opportunities and challenges for mobile banking and mobile payments that can have a profound impact on the types and variety of digital financial services,” the AFI policy adviser said in the report.

In Latin America, countries like Brazil, Mexico and Peru will be the leaders in terms of penetration rates. However, for the first time, it is expected that Chile and Colombia will have more smartphone users than feature phone users and, in Asia, Myanmar may also leapfrog over other countries in terms of smartphone adoption.

There are 53 AFI institutions with commitments under the Maya Declaration of 2014, which seeks supporting measures to unlock the economic and social potential of the 2.5 billion unbanked people through greater financial inclusion.

No less than World Bank Financial Inclusion Practice manager Douglas Pearce made a commitment to the Mala Declaration.

“Within the World Bank Group, we are realigning resources to support your Maya (Declaration) commitments at the country level,” Pearce said.