IGF 2020 WS #310 How digital payments support inclusive economic growth?

Time
Tuesday, 17th November, 2020 (09:00 UTC) - Tuesday, 17th November, 2020 (10:00 UTC)
Room
Room 1
About this Session
We discuss the possible ways of implementation of discussed policies around the world and provide factual insights on determinants of economic growth and financial and digital inclusion.   
Thematic Track

Organizer 1: Konrad Slusarczyk, Visa
Organizer 2: Katarzyna Cyrbus, Grayling Poland
Organizer 3: Pawel Widawski, Fundacja Polska Bezgotowkowa
Organizer 4: Piotr Mieczkowski, Digital Poland Foundation

Speaker 1: Konrad Slusarczyk, Private Sector, Eastern European Group
Speaker 2: Willem Pieter De Groen, Civil Society, Western European and Others Group (WEOG)
Speaker 3: Pawel Widawski, Private Sector, Eastern European Group

Additional Speakers

Speaker: Mr Killion Munyama (https://www.intgovforum.org/users/kmunyama27457)

Moderator: Ms Nell Przybylska (https://www.intgovforum.org/users/nellprzybylska22505).

Online moderator: Ms Katarzyna Cyrbus  (https://www.intgovforum.org/users/katarzynacyrbus18874

Moderator

Iga Wilczyńska, Private Sector, Eastern European Group

Online Moderator

Piotr Mieczkowski, Civil Society, Eastern European Group

Rapporteur

Konrad Slusarczyk, Private Sector, Eastern European Group

Format

Panel - Auditorium - 90 Min

Online duration reset to 60 minutes.
Policy Question(s)

Policy questions we plan to raise during the 1 part of the discussion: · How to use digital payments to boost development of micro and small businesses and drive entrepreneurship in countries with low employment? · How to ensure everyone reaps the benefits of the growth of the digital payments and how digital payments may support financial inclusion among the underbanked? · How digital payments enhance the trust to the digital solutions? · What policies may be adopted to increase the use of digital payments? · What industry-wide standards may support building secure, resilient digital payments infrastructure and how to ensure the participation of different parties (governments, issuers, merchants) in building secure digital payments infrastructure? · How to facilitate and fasten building digital payments infrastructure in less developed countries? Exemplary other policy questions, that may be elaborated during the second part of the discussion, with all the listeners: · How digital payments may help eradicate the informal economy? · Do digital payments influence consumer behaviour? How to use digital payments in supporting sustainable behaviour? · How digital payments may support the development of connected communities in a world where 68 percent of the population will live in urban areas by 2050? · How digital payments facilitate digital education and inclusion?

Over the last two decades, digital payments have made significant progress in displacing cash in many countries around the world. Nonetheless, the expansion of digital payments has been uneven. Globally, an estimated 41 percent of consumer payments today are still made with cash. New technologies and business models offer the potential to speed up traditional patterns of acceptance growth. Smart policy levers– whether led by government, the private sector, or a public-private partnership can also help to further popularize digital payments. Internet Governance Forum is a platform of discussion for international experts and policy makers focused on smart, safe and inclusive internet policies. Fast, reliable and secure digital payments can support inclusive economic development, boost entrepreneurship and improve everyday life of citizens. We intent to initiate the broad discussion on increasing cashless payments acceptance around the world.

SDGs

GOAL 1: No Poverty
GOAL 5: Gender Equality
GOAL 8: Decent Work and Economic Growth
GOAL 10: Reduced Inequalities
GOAL 11: Sustainable Cities and Communities
GOAL 16: Peace, Justice and Strong Institutions

Description:

Digital payment innovations can be a catalyst for the digital economy. Digital payment solutions help unlock economic growth, boost tax revenues, and reduce the size of the informal economy. As a critical source of empowerment for micro and small enterprises, women entrepreneurs, and underserved populations, digital payment solutions can help improve public services, which answer citizen needs. Public-private collaboration and investments in the payment infrastructure in Poland have helped to drive unprecedented levels of digital maturity and financial inclusion. On the case of Cashless Poland Program, co-founded by Visa, we examine the effectiveness of programs focused on boosting digital payments on entrepreneurship and development of the economy as a whole. We discuss the possible ways of implementation of discussed policies around the world and provide factual insights on determinants of economic growth and financial and digital inclusion.   

More:

Digital payments help reduce informal economy and boost GDP. According to A.T. Kearney, “Digital Payments and the Global Informal Economy” survey, 20 percent increase in digital payments per year for five consecutive years can reduce the GDP impact of the informal economy by up to 21.8 percent. Assuming 70 percent of informal activity transfers to the formal economy, tax revenues can also increase substantially – by 3.4% in larger economies like China and as much as 11.3% in medium-sized economies like Kenya. Digital payments facilitate adoption of more advanced digital solutions Doing business rankings list paper/digital ratio in administration procedures as one of the factors of effectiveness of the processes, which has a direct impact on the easiness to start a business or registering property. Above all, they make the procedures reliable. Digital payment accounts are often people’s first contact with other financial services. And they serve as an accelerated path to the use of other digital products. Such products as digital disbursements can also be a catalyst for financial inclusion, helping to bring unbanked and underbanked populations into the financial services mainstream. Reloadable prepaid products can function like bank accounts for some unbanked and underbanked populations, providing a secure place to store, track, and load funds. Digital payments enable sustainable and inclusive economic growth According to a comprehensive research of Moody’s Analytics, conducted across 70 reviewed countries representing 95 percent of global GDP, every one percent increase in the usage of digital payments could result in an average annual consumption increase of $104 billion. This applies to both developed and emerging markets, with emerging markets seeing the biggest GDP gains. Importantly, the data demonstrated that with the proper financial infrastructure in place, developing markets could see boosts to GDP as card penetration increases. Shift to credit, debit, and prepaid payments added US $296 billion to global GDP, raised annual household consumption of goods and services, and added the equivalent of 2.6 million new jobs on average annually.

Digital inclusion cannot be achieved without digitisation of micro and small merchants. Around the world, hundreds of millions of small merchants provide jobs and economic vibrancy to their communities. But many do so outside the formal system and without the benefits to growth, investment and productivity that financial services bring. Moreover, financial inclusion cannot be achieved without including small merchants; they are where the world’s two billion unbanked people shop, and many are unbanked themselves. Digital payments enable micro and small businesses to thrive Digital payments help micro and small merchants grow their revenue, manage their business, and gain access to other financial services. Research has found that once businesses begin accepting digital payments, their revenues increase an average of 17%. Acceptance of digital payments can also introduce small businesses to a broader pool of potential customers through rapidly growing e-commerce channels, including exposure to international markets. More broadly, digital payments can increase merchants’ security and that of their customers by reducing the risk of theft of cash. According to a 2017 study on “The Future of Payments for Irish SMEs”, 62% of surveyed merchants expressed fears over the security risks of accepting cash, namely the potential for theft and fraud. The study revealed that 28% of merchants had reported a cash-related robbery and 33% had experienced an incident of staff fraud in the past five years.

Cashless Poland Program proves that cooperation of different market entities is needed to fight with barriers for development of cashless payments. Cashless Payments Program created in 2017 by The Cashless Poland Foundation is based on the agreement between public administration (Polish Ministry of Finance) and private companies – payment organizations, acquirers and banks and as such is a unique example of cooperation of a very wide group of entities, competing with each other in their day-to-day business. The project focuses on small businesses that do not accept cashless payments or contactless mobile payments for their products and services. Entrepreneurs that participate in the program benefit from a free payments terminal installation and 1 year free of charge cashless payments service. In 2019, Poland exceeded 230,000 terminals that have been installed thanks to the Foundation's efforts. It means, every third entrepreneur accepting cashless payments in our country received a payment terminal under the Program. Its beneficiaries include small, medium and micro enterprises and public administration entities. The success of the Program is also evidenced by gathered stories of entrepreneurs. They emphasize that installing payment terminals opened their businesses to new customers who more and more often want to pay digitally. Program participants themselves encourage other entrepreneurs to accept cashless payments. 

 

We kindly invite everyone interested in issues of digitisation and inlusive economic growth to participate in the discussion and share views or questions to panelists on those matters. 

Expected Outcomes

Gathering different perspectives of multinational community, complementing already gathered knowledge. Counselling/issuing recommendations for policymakers with best practices and case studies for countries/regions with low digital payments adoption

The session is divided into two segments. The first part (30 min) is designed to present the issue by panel speakers. The second part (30 min) is designed to engage online auditorium into discussion. Moderators will choose questions to either one or all of the speakers, as well as motivate participants to present their insights, desirably different from those presented by invited speakers. 

Relevance to Internet Governance: Evidence shows that increasing the saturation of digital payments requires effort from different stakeholders, including digital payments providers, issuers, non-governmental organizations and governments. Through meaningful partnerships the adoption of cashless payments is quicker and permanent. All abovementioned parties need to acknowledge their role in building inclusive digital growth. Selected countries’ examples prove which solutions regarding Internet governance and paperless policies enhance the inclusion goals.

Relevance to Theme: Significant evidence raised above shows that digital payments help to build sustainable, inclusive economic growth, eradicate poverty, reduce informal economy, enhance digital and financial inclusion, improve the lives of citizens and entrepreneurs and increase the availability and trust to other digital solutions. Digital payments may also help to build efficient and trustworthy institutions that enable sustainable development of economies and build effective tax systems, raising effectiveness of states. Research proves that digital payments serve everyone, regardless of nationality, sex, or race. The also give greater chance for the underprivileged to improve their lives.

Online Participation

 

 

1. Key Policy Questions and related issues
What are the determinants of inclusive economic growth and economic recovery and what role play digital payments and digitisation in supporting inclusive economic growth?
How digital payments may help eradicate the informal economy?
What can be done by different players on the market (private sector and governments) to ensure everyone reaps the benefits of digitisation and inclusive economic growth?
2. Summary of Issues Discussed

It is widely accepted that digital payment innovations can be a catalyst for the digital economy. Digital payment solutions help unlock economic growth, boost tax revenues, and reduce the size of the informal economy. Under conditions digital payments are a critical source of empowerment for micro and small enterprises, women entrepreneurs, and underserved populations. Digital payment solutions can also help improve public services, which answer citizen needs. Example of Cashless Poland Program introduced in Poland demonstrates that public-private collaboration, development of market-wide standards and investments in the payment infrastructure contribute to digital maturity and financial inclusion, by almost doubling the number of payment terminals used by merchants. It is desired that other countries develop market-wide standards, prepared by private companies, governments and non-governmental organisations, that will boost the development of digital infrastructure and inclusive economic growth. Cashless Poland Program is an universal concept that may be duplicated in the developing economies.

3. Key Takeaways

The participants of the discussion agreed that digital payments may be an efficient solution to support the development of inclusive economic growth and eradicating the informal economy. Economic theories say that the lower the transaction costs, the more economic activity is conducted, which boosts economic growth.  The studies show, that 20% increase in digital payments per year for 5 consecutive years can reduce the GDP impact of the informal economy by up to 21.8%. Impact of digitisation on economic growth is the biggest for the emerging markets. According to a comprehensive research of Moody’s Analytics, conducted across 70 reviewed countries representing 95% of global GDP, every 1% increase in the usage of digital payments could result in an average annual consumption increase of $104 billion. This applies to both developed and emerging markets, with emerging markets seeing the biggest GDP gains. Importantly, the data demonstrate that with the proper financial infrastructure in place, developing markets could see boosts to GDP as card penetration increases. Shift from cash to credit, debit, and prepaid payments added US $296 billion to global GDP, raised annual household consumption of goods and services, and added the equivalent of 2.6 million new jobs on average annually.  Digital payments can help SMEs grow their revenue, manage their business, and gain access to other financial services. The impact can be substantial – research has found that once businesses begin accepting digital payments, their revenues increase an average of 17%. Digital payments also facilitate the adoption of other digital solutions among the citizens. Hence, faster, easier, cheaper and more secure payments can thus contribute to lower transaction costs and boosting the economic growth.   Supporting SMEs in building their presence on the Internet, encouraging them to accept digital payments and introducing market-wide initiatives is desirable in the developing countries.

6. Final Speakers

Speaker 1: Konrad Ślusarczyk, Visa (https://www.intgovforum.org/users/slusarck20094)

Speaker 2: Willem Pieter de Groen, Centre for European Policy Studies (https://www.intgovforum.org/users/willempieterdegroen19982)

Speaker 3: Paweł Widawski, Cashless Poland Foundation (https://www.intgovforum.org/users/pwidawski20362)

Speaker 4: Killion Munyama, Member of Polish Parliament (https://www.intgovforum.org/users/kmunyama27457)

Moderator: Nell Przybylska, Digital Poland Foundation (https://www.intgovforum.org/users/nellprzybylska22505).

Online moderator: Katarzyna Cyrbus, Grayling Poland (https://www.intgovforum.org/users/katarzynacyrbus18874

8. Session Outputs

Panellists together with panel discussion participants agreed that the example of Cashless Poland Program could potentially be a good role model for developing countries, which can benefit the most from digital payments. 

The Cashless Poland Program (https://polskabezgotowkowa.pl/en) established in 2017 by the Cashless Poland Foundation is based on an agreement between public administration (Polish Ministry of Finance) and private companies - payment organizations and banks and as such is a unique example of cooperation between a very wide group of entities, otherwise competing with each other on a daily basis. The beneficiaries of the Program include micro, small, and medium-sized enterprises and public administration units - over 225,000 entities in total.Entrepreneurs participating in the program benefit from a free installation of a payment terminal and a year of free acceptance of cashless payments. In Poland more than 300,000 terminals have been installed thanks to the Foundation's activities. This means that every second entrepreneur accepting cashless payments in Poland received a payment terminal thanks to the Program. The number of payment terminals in Poland is growing rapidly – the number of terminals in Poland has exceeded in 2020 one million. This dynamic growth is a reflection of how the payment infrastructure and digital capabilities allow businesses to grow.

The Foundation's activities have eliminated the initial costs, the main barrier preventing entrepreneurs from having a terminal - a common belief in the high cost of such a service. The program has eliminated this barrier by removing the costs of installation and lease for the first 12 months and the transaction execution costs. Entrepreneurs can therefore assess by themselves whether having a payment terminal brings benefits to them. Currently, the Foundation focuses on eliminating white spots in cashless payments on the map of Poland.