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IGF 2020 – Day 12 – WS310 How digital payments support inclusive economic growth?

The following are the outputs of the real-time captioning taken during the virtual Fifteenth Annual Meeting of the Internet Governance Forum (IGF), from 2 to 17 November 2020. Although it is largely accurate, in some cases it may be incomplete or inaccurate due to inaudible passages or transcription errors. It is posted as an aid to understanding the proceedings at the event, but should not be treated as an authoritative record. 




      >> MODERATOR: I think we can start because I see everyone here.  And I hear everyone correct. 

     Warm welcome to you all.  My name is Nell Przybylska.  I work for Digital Poland Foundation. 

     I have the pleasure to moderate today's discussion.  I would like to remind you that the subject, How Digital Payments Support Inclusive Economic Growth. 

     Today I will ask Konrad Slusarczyk from Visa, Killion Munyama, a member of Polish Parliament, and Pawel Widawski, Cashless Poland Foundation, and Willem Pieter De Groen, European Credit Research Institute. Sorry for maybe no good pronunciation of your surname.

     >> KONRAD SLUSARCZYK: That is completely fine.  We are a global community right now so.

     >> MODERATOR: And our guests will try to answer my and the audience questions, of course, everyone can have some questions and send them. 

     Today's discussion during the Internet Governance Forum is powered by Visa, and that is why I would like Konrad to speak first and answer the question how digital payments support inclusive economic growth.  Konrad, the floor is yours.

     >> KONRAD SLUSARCZYK: Thank you so much, Nell. I'm really happy to be here.  We have great participants and hopefully we will also have really interesting insights to share.  I think this is great opportunity being at Internet Governance Forum, especially in extraordinary times we are living in right now.  So I think, I hope the discussion will be very fruitful for us and for our audience. 

     So to answer your question now.  Actually, the impact of digitalization on economic growth is the biggest for emerging marks, according to the research of conducted Modest Analytics, conducted on 70 countries globally that generate 95% of global GDP.

     It turned out that every 1% increase of the usage of digital payments can contribute to an average annual consumption increase by even $104 billion, which is a significant number. 

     This applies not only to emerging markets, but also to developed ones.  But of course the bigger GDP gain can be seen by the emerging markets obviously. 

     Importantly, the data demonstrated that once the financial infrastructure is in place, the developing countries can see a boost in GDP as the card penetration increases.

     Digital aid distribution also helps boost economic recovery which is, of course, extremely important in these times.  As the fallout of the COVID-19 pandemic continues, the need for government to address the problems which enable swift and efficient distribution of financial support for people in need have definitely rocketed. 

     The COVID crisis has clearly proved that the need for digital disbursement is of a great importance right now.  And we see what digital disbursements try to start replace older measures of distribution of money like cash, checks for vouchers which historically the governments tends to use when the State of emergency came.

     Digital payments facilitate also the adaptation of more advanced digital solutions.  And digital solutions enhance effectiveness of processes which have a direct impact on the easiness to start, for instance, opening a business or registering a property, all those activities very crucial for inclusive economy growth.  And above all, of course, they definitely support the resilience and reliability of the procedures.

     We definitely cannot forget about the financial inclusion, which is drastically helped by digital payments because it becomes widely accepted by governments and by multi-national bodies like the World Bank.  But electronic payments plays a significant role in increasing financial inclusion.  And it is not only addressing the payment systems but also the access to the basic payment account.

     Right now, nearly 40% of all adult population globally, which translates to two billion people does not have an access to a basic account.  And that in my view, enhancement or improvement of payment system and infrastructure can only play a significant role into financial inclusion for those societies overall.  Thank you.

     >> MODERATOR: Thank you.  I want -- you said 40% worldwide or in Poland?

     >> KONRAD SLUSARCZYK:  Exactly, 40% adult population.

     >> MODERATOR: Okay.  And maybe Pawel would like to answer the question how digital payments support inclusive economics, or as a representative of Digital -- uh, not Digital Poland Foundation.  I'm sorry, Digital Foundation.  I always think about the Digital Poland, it is the name I have in my mind all the time.  

     Pawel?  You need to, your microphone switch.  There.

     >> PAWEL WIDAWSKI: Absolutely digital payments positively influence every economy, developed and still under development. 

     And there is no floor, we all know that.  The question is how to do it properly, how to do it efficiently, and how to speed up the development of payment infrastructure.

     >> MODERATOR: Let's say, how do it?

     >> PAWEL WIDAWSKI: Well, I think that the key element of payment infrastructure can consist from two element.

     The first one are standards.  And standards are key element, crucial element in general in financial services.  Without standards, it is not possible in the modern financial markets and financial services operate in general.  So we need standards.  And standards usually are produced by the market, by the market participants.

     And we know a number of different examples how startups can influence positive development of certain services, certain areas of financial service including payments.  And very, very good example of such a standard is API or API standards that creates open banking solutions.  Here in Poland, here in Europe, but also across the world. 

     So the market players decide to meet together and create certain standard that allows intra-operability.  And based on the standard, banks and on the other hand -- on the other side, third parties can communicate with each other and hence with this achievement, the market can produce and create new products that are positive for not only for the market but also for the whole society, for the consumers, for entrepreneurs and the whole economy.

     Unfortunately, not in every case standards are enough.  We know a lot of examples where there is a very good technical standard, very good specification, very high level of security, even very good business rules which are part of the standard.  But it is not enough.  There is something wrong or there is a kind of barrier that should be removed. 

     So my -- the second element that I would like to mention is market initiatives that are aimed at removing such a barrier or speeding up the development of certain area.  For example, infrastructure. 

     And a very good example of such a market initiative aiming at faster development of payment infrastructure in Poland is Cashless Poland Foundation, Cashless Poland Program that I have the pleasure to represent.

     So maybe let me tell you a little bit about --

     >> MODERATOR: How Cashless Poland Foundation can support the digital payments?

     >> PAWEL WIDAWSKI: Of course, how we support.  But I think the more interesting element is why this creation was created. 

     So in 2016, and you should be aware of this fact, 77% of active points of sale in Poland did not accept payment cards, digital payments in general.  So we can say, we can assume that this group of merchants were financially excluded even though they had bank account probably, functionally they were financially excluded.  So it was a systemic problem. 

     In 2016, as well, we had only 500,000 POS terminals, which means that Poland were far below the EU average in terms of infrastructure density of saturation.  And it was a problem for all economy.

     And but the question was why merchants were so hesitant to use electronic payments.  And according to a number of researches that we have made at that time, there were one major barrier relatively -- or not relatively easy to address, it was perception of very high costs of having terminal and high cost of acquiring service at that time.

     So at the end of 2016, the group of market stakeholders and payment card organizations, issuers, banks, and acquirers decided to do something about it, to design a solution that would remove this barrier.

     And after several months of development of this solution, the final solution was the free terminal for one year for every merchant that has never accepted payment card before.

     And after three years of operation of the program, we can say that this solution was very successful as today we have more than one million terminals in Polish market.  So we have doubled the number of terminals.  And payment card acceptance network in Poland is relatively high.  We almost reach the EU average.

     So this is a success story how to implement the market-driven solution supported by the government because the government from the beginning decided to support this solution. 

     This is good example how standard and market initiatives can influence positively the market and limit financial exclusion.  Okay.  That's all.

     >> MODERATOR: Thanks.  Right now I think it is good to -- it is time, good moment to talk about gross economic growth that we have during the pandemic. 

     And I have a question to Killion.  What are the determinants of inclusive economy growth?  On mute, please.

     >> KILLION MUNYAMA: Yes, I have unmuted.  Thank you. 

     First and foremost, I would like to thank you for inviting me to this conference, we could call it, or rather seminar.

     >> MODERATOR: Yes.

     >> KILLION MUNYAMA: It is a great pleasure being with you all and seeing you all with us here. 

     First and foremost, to answer your question, it is important actually to try and make a definition of what inclusive economic growth is all about, okay.

     >> MODERATOR: Okay.

     >> KILLION MUNYAMA: It is actually a concept that advances equitable, we could say, opportunities for economic participants during economic growth with, of course, benefits incurred by every section of society.  Every section of society.  The ones who are disabled, the ones who have got we could say not equal opportunities. 

     The definition of inclusive growth actually implies direct we could say links between macroeconomic and microeconomic determinants of the economy; and, of course, economic growth in general.

     So in order for each and every one of us to be included, it is very important that there should be some measures to ensure fair and equal access to all the -- from the start of society in general including disadvantaged and, of course, marginalized to opportunities created.

     Therefore, of course, digital economies have a very big role to play in order to have everybody included in the whole system.  So in reality, inclusive growth depends actually on two factors, okay. 

     One is economic growth, and the other one is economic distribution because we should be in a position to distribute the wealth that we are accumulating at a particular moment in time.

     Similar to the consumer theory whether indifferences actually curves, we could say, we do represent the changes over time in aggregate demand, of course, we decompose the income and substitution effect into growth and distribution or we could say components.

     The findings that have been there so far in the economic development about inclusive growth emphasize the fact that access to finance by the poor is a prerequisite actually for poverty reduction and sustainable economic development as well.

     So if there is access to finance, then the poor are in a position to come in and participate and to reduce poverty as well.

     There are four pillars of inclusive growth, okay.  One is economic growth that has employment as well infrastructure in it.  When we talk about growth, we talk about GDP per capita growth rate.  When you talk about employment, we are talking about employment in industrial sector as well as employment in services sector, okay.  The difference which is very much familiar to all of us.

     When we talk about infrastructure, we are talking about NADUs and also the possibilities of developing roads and right-of-way and so forth, okay.

     And then the second pillar is inequality.  And when you talk about inequality, we're talking about the general index, poverty, talking about poverty head count ratio when looking about the purchasing power priority, okay, the PPP.  And then, of course, the general equity which is in the ratio of female to male level force participation rate.

     Then the third pillar is accessibility.  We're talking about education, we're talking about health.  When you talk about education, the primary school enrollment rate and so forth.  But that is not a big issue in countries like Poland where we have compulsory primary school participation. 

     Health, it is the issue of mortality, the rate which matters a lot here.  There are countries where mortality rate is very, very low in the sense that people actually die earlier.

     And, of course, in this very issue of accessibility, we are talking of access to water and, of course, sanitation.  This has nothing much to do with Poland because accessibility is actually at its highest peak as well as other EU countries.  But there are developing countries which have a problem with access to water and sanitation. That is, the improved water source, improved sanitation facilities.

     And the last one is about governance, that is the fourth pillar. Governance, that is government effectiveness.

     When you talk about government effectiveness, you're talking about institutions playing a very important role and actually performing their role.  Not just institutions that are implemented but not performing their role.

     And then, of course, as far as governance is concerned we're talking about the corruption perception, okay, which is also a big issue in developing countries.  Especially when we're talking about the issues being handled in a corrupt way, not in a way that is -- that we can easily accept. 

     So those are the four pillars which are of great importance in as far as inclusiveness is concerned.  Thank you.

     >> MODERATOR: Thank you.  Maybe we can start to talk about informal economy, and I would like back more to the subject, digital payment. 

     How digital payments may help eradicate the informal economy?  And maybe Willem.  Is that a good pronunciation? 

     Maybe Willem Could answer for this question.  Of course, sorry, I didn't say this in the beginning, but everyone can answer for every question.  I just want to help you and say who will talk first to not waste time for waiting for the voice.

     >> WILLEM PIETER DE GROEN:  Thank you very much, Nell, and also Visa and IGF for inviting me to this panel, which I think is a very important topic. 

     And then if I may directly go to your question, how can basically digital payments contribute to eradicate, reduce the informal economy. 

     I think what we see in many countries where there are or there is an increase in digitalization of payments, we see that almost automatically transactions if they were before informal become formal. 

     Myself, I have done a lot of work on, for instance, things like platform work.  And there we see that transactions in particular which part of the -- thinking in large part of the world, there are many informal transactions happening.

     If you look in the region where I'm most active, Europe, you see there are still quite a lot of informal transactions that are mainly around households.  So, for instance, someone that cleans the house and is paid in cash instead of through a transfer.  What we see there in countries like France and so before they did anything about it, there were 80 to 90% of these transactions were not recorded.

     So informal, there was no tax paid.  Also which have large implications for the people's life because if you are active in the informal economy, for instance, in Europe you cannot benefit from any kind of social protection and broader protection in your labor situation.

     So if you don't have the digitalization, it becomes more difficult for people not to declare the transactions to their tax authorities so then it's a drive towards formalization. 

     We see that in like countries like France and Belgium that really can contribute to reducing the informal transactions, for instance on the household transactions, by two-thirds or more.  So that's really enormous. 

     And can be either through government scheme, what they have mostly in Belgium and France, but already taking it off from cash to digital payments can really help there.  So that is in brief a response to your question.

     >> MODERATOR: Okay.  Thank you.  And Konrad --

     >> KONRAD SLUSARCZYK: Yes, thank you.

     >> MODERATOR: -- could you answer the question?

     >> KONRAD SLUSARCZYK:  Willem already expressed, I'll add some perhaps more insights. 

     >> MODERATOR: I hope so, I hope that Visa has some interesting insights.

     >> KONRAD SLUSARCZYK: Yeah, we have some reports and researches at hand that we can share with the results. 

     For interesting, very interesting report of IT Kearney proves that 20% of growth of the digital payments per one year in five consecutive years can result in the reduction of informal economic impact on GDP by even up to 22%, which is huge.

     So assuming 70% of informal activities transfer to formal economy, tax revenues for the government, for the State can increase substantially.

     And again from this report, two examples for large economies like China, it's up to 3% of increase.  And medium sized like in Kenya, it is even above 11. 

     We know that businesses engaged in the informal activities pay less as comparing to their fair share of taxes.  And this not only harms competition among the society as such but can also result in substantially lower tax revenues for governments, which in effect means that there are lesser financial resources to contribute to economy development infrastructure or social problems. 

     An example from the Polish ground, Polish Economic Institute Research has shown that informal economy impact on the taxation reduced the revenues in the years 2014 to 2018 of 550 billion Polish workers.  So again, a very large number. 

     While we still fully recognize the role that cash still plays in society, unfortunately, cash is the single most important enabler of formal economy as this allows transactions generally to sidestep the government oversight and proper taxation for the governments. 

     So it is not surprising that the higher the amount of digital processes and digital payments in the market, the less of informal economy is.

     And that to prove that and nowadays, 65% of all measures that the governments are taking to tackle the informal economy and focusing on digital payments, whereas as in comparison to one-fourth in 2007.  So the focus is definitely more determined by the governments on digital payments.

     And maybe just to finalize my response, digital payments as such can also reduce the risk of leakage, risk of over cost, or can also reduce the cost of acceptance.  So basically, when we accept digital payments, it is definitely more convenient for the consumers, for the citizens to pay their taxes, and ultimately for the governments to gain from more increased taxation. 

     So those are definitely positive news for developing positive informal economy.

     >> MODERATOR: Thank you.  I'm not sure if Pawel would like to add something.  But maybe all we said about this already?

     >> PAWEL WIDAWSKI: I think it was very comprehensive. 

     It is hard to find anything else to add in this respect. 

     I think I can speak a little bit to COVID situation.  Because, on the one hand, we see very, very positive trends in terms of cashless payments.  We all know that the pandemic could be a game changer in this respect.

     And relation between cash and cashless transaction is changing in favor of cashless.  And we all know this from our perspective, from our experience as consumers, we pay more cashless. 

     But on the other hand, and it is in relation to shadow economy, we see that a number of entrepreneurs and a number of merchants, specifically those micro entrepreneurs are in troubles right now.  They are fighting for survival, specifically in those areas who are locked down where we buy less.  So they are on the edge.

     And there is a risk that they will come back to shadow economy in order to survive.  So probably we need to find a solution for them to not let them come back to shadow economy.

     >> MODERATOR: Do you have an idea how to ensure the participation of different parties, government and merchants in building circular digital payment infrastructure?

     >> PAWEL WIDAWSKI: I would say that different party, private sector and public sector players, they have different aims and different priorities in general. 

     But in terms of payment infrastructure, they have very similar interests, cooperation in the area of building secure payment infrastructure is win-win situation.  So we need, and this is a lesson from Polish experience, we need to build awareness among all of the parties that engagement in this process, in the process of building developing payment infrastructure is in favor of all. 

     Specifically for the government because it is very useful element of fighting this shadow economy.  So I think the most important element is building awareness among all and then cooperation.

     >> MODERATOR: Okay.  Thank you. 

     Killion, what can be done by governments to boost economic growth during and after the current crisis caused by global pandemic?

     >> KILLION MUNYAMA: Thank you very much for giving me the floor. 

     And also it is very interesting to hear about the comments and the answers that have been put forth by the other gentlemen, that is Willem and Konrad as well as Pawel.

     But, of course, there is no doubt that currently we are heading towards what we call slow-balization.  For those of us not aware of the new terminology, it refers to a new pattern of world trade that is characterized by snail-paced growth and market reduction in foreign investments as well as unresolved trade disputes, geopolitical tensions, shrinking bank loans that we are experiencing at the moment a retreat to what we call protectionist policies which we have been observing in the United States as well as in the united kingdom.

     Of course, the U.S. hoping that things might change now after the elections.  But the United Kingdom we are after Brexit so making it a bit complicated to cooperate with other European countries. 

     But, of course, the most important element that will contribute to slow-balization is the global pandemic which has added fuel to the fire.  If you were to observe how the world economy is performing today, there is some sort of a retreat from the trend that we had which was globalization in general.

     Governments have a very big task to encounter and their most important things is to have institutions that should function properly is that from ministries through the central banks, of course, surveillance institutions and we have banks which are commercial. 

     Governments really don't have the impact there.  But through the decisions, the multi-policy decisions as well as the power in the physical policy decisions, fiscal policy decisions can actually have an impact on how those institutions operate.  Government can also try to influence the rate of economic growth through the demand side and supply side policies.

     When we are looking at the demand side policies, we are looking at cutting taxes to increase disposable income and encourage spending.

     Although, this move will would increase the budget deficit and lead to higher borrowing.  Nevertheless, it is a direction in which the government can go. 

     The demand side we can talk about lowering interest rates.  Here the reduction in the borrowing costs which would increase consumer spending and investment as well.  But, of course, so far there hasn't been any trend of changing the interest rates which are -- we could say quite low today because we are talking about the fact that they are at 0.1%.  But it could go to 0%, for example, which would increase consumer spending.

     Thirdly, the government could think of, let's say, depreciating.  But, of course, here the government is not one that decide in the depreciation of value of the currency.  We don't have a fixed rate system in Poland.  We have 14 exchange rate system in Poland so deciding on devaluing is not possible.  But in developing countries where they have quite fixed exchange rates, that can be done.

     The other step that the government can do is increase real wages.  If wages grow above inflation then consumers have more disposable income to spend, okay.  That is another step that would be taking place.  But that is on the demand side, correct?  That is on the demand side.

     When we look at the supply side policies that the government could actually implement or rather boost would be development of new technology, the internet, computers was one of our main topics today which do contribute a lot to increased productivity in the 21st century. 

     We also have the idea of introducing new management techniques which to -- to better industrial relations that would help workers become more productive.

     The third supply side policy would be improved skills and qualification.  That would be about the education.  And then we also have the more we could say flexible working practices, working from home, self-employment. 

     Third one should be boosted, home offices and so forth should be boosted by the governments today, especially in this period which we are undergoing.

     And the other one would be increased net migration.  Especially encouraging workers with skills to be able to be accommodated in the countries without restrictions.  Let's say, for example, you have Ukrainian doctors who would like to work in Poland but there are restrictions on how to notify their degrees and so forth.  There should be a policy to allow those doctors to actually work easily since they have their degrees.

     The other would be regulate policy pertaining to investment migration.  Currently in the Council of Europe we are working on resolution calling upon investment migration to be one of those things that could be implemented as policies in countries so that those who would like to migrate and invest in a country can be facilitated the chances of working easily.

     The other one would be raise retirement age, therefore increasing the supply of labor.  Of course, it is quite controversial in Poland.  We had the retirement age actually decrease from 65 to -- from 67 to 60 for ladies and 65 for men. 

     But this is an issue of how to actually fit it in such a way that everybody is satisfied, all right.  Let's say if he has worked for 40 years, let's say he could retire.  So that would actually increase supply of labor.

     The last one would be public sector investment.  Improved infrastructure.  Of course, we are talking about roads, about railway, airports and so forth.  And, of course, increasing -- increased spending on education and health.

     Those are the steps that government actually can be able to do today, okay.

     >> MODERATOR: Do you think we -- we still have in Poland, and you are member of Polish Parliament, manage to spend for this project like big money for right-of-way and so on and so on so that you showed that long list of great options, yes, but I'm afraid --

     >> KILLION MUNYAMA: It is not the issue of having money to spend, it is the issue of how to govern the money that you have.

     >> MODERATOR: Do you think still we have?

     >> KILLION MUNYAMA: What I'm trying to point out is that if we are talking about Poland, right, we are in a position to have resources, especially when the EU budget is going to come out insofar as infrastructure is concerned. 

     Whatever is in the budget today because so far we are going to face a very difficult time and the budget deficit will be very big.  There are propositions which we cannot be able to command easily, all right.

     Because from what I pointed out in the demand side, for example, the idea of influencing let's say cutting taxes okay, of course that would increase the budget deficit but lower interest rates.  That would be in a position to boost the consumer and at the same time be in a position to get the currencies, I mean the income that is required to build.

     Of course, we are not in a position to build airports.  I mean I know what you have in mind, all right.  But it is not possible actually to build an airport whereby there are airports already existing.  Just a matter of improving their operations today.  And Poland doesn't need to have a big new airport, as we indicated here.

     But when I'm talking about infrastructure, I'm talking about the roads, you know, the roadway network which we have already but they need to be improved in order to facilitate development in the near future, okay.

     >> MODERATOR: Okay.  Thank you.  I thank you for all of this proposition.

     I think we need to get back to the topic.  And I think Kata would like to say something.  No, back to the topic of digital payments. 

     And I think maybe it is time for Willem, maybe you can answer the question how digital payments may support financial inclusion of the underbanked and the unbanked in the beginning of the discussion?  And maybe you can answer the question.

     >> WILLEM PIETER DE GROEN:  It is Katarzyna that wanted to interrupt, just to be sure. 

     Related to the question, how digitalization may support financial inclusion among the underbanked.  I think there is a clear model with digitalization in general, high fixed costs or relatively high fixed costs to set it up and relatively low value or marginal costs to operate it. 

     What is the advantage of having the lower marginal costs?  The marginal costs are the costs for adding one more customer to your network.

     So if you are a provider of these payment services if you want to offer your product to one more customer, with the digitalization in general that additional cost is very low which allows you to offer your products at a lower cost.  If the cost is lower, you will be able to offer it to more people.

     In particular to those people that are today unbanked because the financial services are too expensive or the manual checks that need to be performed can be basically -- are too much of a hurdle and cannot be digitalized, these are the ones that primarily can be connected through digital payments.

     Also, another area I missed a bit maybe in the infrastructure investment discussions, the investments in digital infrastructure I think also would digital payments, but also the rollout of new digital technologies and also increased access to digital infrastructures and also those areas of countries that before were not or under-served can be better served. 

     So thinking primarily about remote rural areas where people before didn't have access to a bank branch but now actually online your location matters less as long as you have access to digital infrastructure.  And even that can be very basic infrastructure such as mobile phone you can get access to banking services.  So I think these are maybe the most commonly mentioned and obvious examples.

     At the same time, maybe also go to a bit more deeper concern, I mean if we look at financial inclusion, it is, of course, not only having access to payments but also having access to savings accounts which often are linked to the basic bank account that Konrad mentioned before.

     So also relatively obvious.  And insurance that can be connected to mobile.  And that is quite easily connected through the basic banking services. 

     Maybe one less known is the access to credit.  What we see is that in many countries, there are a certain credit reference agencies that are used by banks to assess whether you can get access to consumer or mortgage credit.

     But in most countries, they are only covering part of the population.  That is different transactions or negative payments or have much more problems.  And people that go from one country to another or those that have never purchased a house or that basically have a relatively thin financial record in the country where they live.

     And also for that, having the digital payments can help the -- the trail of digital payments can help the bank to make a better decision of the creditworthiness of clients.  That is another aspect which is important to improve the access to finance of larger group of people.

     That being said, I must also say there are also some remarks where digital payments have a challenge in addressing underbanked and where I think that the new additional solutions are necessary and in some countries these are already also developed.  That is primarily where I see people with disability and distance to technology.

     Disability, people that have problems in reading because of visual or other reasons, people that have potentially other problems in understanding messages.  So there, there is really a need to make sure that the digital technologies are accessible for all. 

     And then, of course, we have those that are not that familiar with digital technologies so we speak in general also about elderly but there might be others as well.

     We also see the age of people that have more problem in using these digital applications is readily increasing.  It is becoming less of a problem really, but it is a problem that should be addressed. 

     And I think in the first instance, of course, you would like maybe the private party to also see what kind of solutions  can be invented for those groups that have more problems using digital applications like the digital payments.  Thanks a lot, Nell.

     >> MODERATOR: Thanks.  Maybe right now we can take the floor to Katarzyna.

     >> KATARZYNA CYRBUS: We have a question from Ahmed Shamira who is asking all the panelists you have focused on the bright side of the digital solutions to boost financial inclusion.  Can you also speak on the dark side?  For example, microcredit crisis, et cetera. 

     Especially focusing on developing countries where there is a large informal economy, over 70%, and weaker financial infrastructure and other specific structural economic complexities that affect developing countries and are very different from an EU context. 

     The question is what are the dark side of the digital solutions?  And maybe to add more context to that question.  It was also said before that the more a country blocks free economy to its citizens such as monetary exchange controls, the more its citizens will turn to digital economy, for example, Venezuela. 

     So the main challenge is to regulate the unregulated.  Would anyone from the panelists answer that question or should we maybe precise it more for you?

     >> MODERATOR: I think Pawel knows the answer for the question, and he will say don't we -- we see only the bright side of the digital payments.

     >> PAWEL WIDAWSKI: I mostly see the bright side of the digital payments, but the problem --

     >> MODERATOR: You educate society.  That is why I think --

     >> PAWEL WIDAWSKI: And the problem here is if we don't have payment infrastructure -- and nowadays the payment infrastructure is as important as other infrastructures like energy infrastructure, road infrastructure, flight infrastructure. 

     So this is infrastructure of 21st century.  And if there is no reliable, secure and resilient infrastructure, the economy cannot transform properly into the modern one.

     So our efforts should be put on -- all efforts should be put on reasonable systemic infrastructure development.  And this is key question.  Because once there is no infrastructure you cannot transact electronically in digital way and there are problems that have been mentioned in this question.

     And would like to share my Polish experience because I don't have any other perspective.  We are not wealthy country, especially in comparison to other Europe countries, but we are success in building the payment infrastructure. 

     And this success was possible not because of the State intervention or because of the specific regulation, it was possible because of the cooperation.  Cooperation on two levels.  Cooperation between market participants within banking sector.  Cooperation between banks, payment card organizations, acquirers, but also cooperation between public and private sector.

     And if I could recommend something in order to maybe help in building strong payment infrastructure in other country, the first and most important recommendation for policy maker is to build a good form of cooperation between private sector players but also between private sector and public sector. 

     Cooperation is key element -- a key element of the foundation of payment -- strong payment infrastructure.  That is the foundation of modern economy.

     >> MODERATOR: Thank you, Pawel.  I think because our time it is -- we still have like five minutes or less. 

     Please, Konrad, and if you also could in two sentence said about recommendation for policy makers in our topic digital payments.

     >> KONRAD SLUSARCZYK:  Absolutely.  Thank you, Nell.  This is extremely interesting discussion, and it is too bad that we don't have more time to spend.

     >> MODERATOR: I think we need one hour more.

     >> KONRAD SLUSARCZYK: I know, for example, recovery of the sector which is extremely important for economic growth in general.  But of course conscious of time. 

     A couple of recommendations stemming from what we already discussed and from our observations.  So we agreed that the digital payments can reduce the informal economy or, definitely reducing the informal economy; and, on the other hand, financial exclusion of the society. 

     So from our perspective, governments should definitely support the acceptance of cashless digital payments by entrepreneurs and the business as such because it definitely helps growth of positive trends.

     As and Pawel mentioned, the perfect example here is the development of a Cashless Poland program which proved to be very, very successful. 

     And the other I can observe is that digitalization as such fosters innovation at the market level, both from the business and administrative processes.  Hence, from my perspective, the government should strive to make all possible administrative procedures as digital as possible which can only benefit the citizens and the whole digital for public administration. 

     And the last one what the governments should do, to identify optimal set of policies that should implement, of course, a just and specific characteristics of the market.  But that would target more benefits for merchants or the entrepreneurs and the consumers to encourage them to use digital solution and digital payments on the larger scale, which could be -- and I'm just finalizing the last sentence -- which could be either through tax rebates incentives at the merchant level, for example, for those who buy or rent the POS terminal, or on the other hand for the consumer to reduce the impacts by some rebates policies.

     >> MODERATOR: Thank you, Konrad.  Willem, if you could in one sentence, or maybe two maximum, give us some recommendation in digital payments.

     >> WILLEM PIETER DE GROEN:  Let's stay on topic.  So my main recommendation is, indeed, like I see that digital payments is really contributing to formalizing the more larger part of the economy as well as reducing the number of unbanked, but not all. 

     So I think there is a challenge remaining there.  And a particular work both on the public and private side to stimulate also solutions that are there for people that are less financially literate and have a disability. 

     Also on the micro-company side, there is really a need for a stimulation in order to ensure that they have access to the payment infrastructure.

     >> MODERATOR: Sorry, we haven't time for the question.  And we had a lot of about micro economies.

     And Killion, the last minute for you, if you would like to summarize the discussion.  I didn't want to --

     >> KILLION MUNYAMA: Thank you for giving me the chance to give some sort of recommendations.

     But the most important thing is to understand what are the advantages of a digital economy, all right.  The advantages are mainly great information and choice which everybody will have. 

     Also it saves time, we know that.  Reduced costs for businesses, that is important.  Greater personalization, that is also very important.  Lower barriers to entry, that is also extremely important. 

     Greater flexibility in work.  Enabling people to work from home, that as well is one of those advantages of digital economy.  And benefits, of course, for all developing countries as well.

     But just briefly to answer the question that was asked by the gentleman which understand that there are also some disadvantages.  You say that monopoly power of tech giants, right, that is a disadvantage we could say.  Less community, all right, which means that we are limited.  We don't spend most of the time in the community, we are dedicated to the internet and to the digital economy.  Addictive nature of technology. 

     Privacy issues as well, bypassing of level laws as well as disruption to traditional economy and jobs.  And, of course, finally, and also important, potentially environmental costs that you may be in a position to encounter. 

     So those are some of the disadvantages I can also put forward here.  But governments should emphasize on building the infrastructure, especially the internet infrastructure in all countries.  Thank you.

     >> MODERATOR: Thank you very much.  Our time is running out.  Thank you for the discussion and interesting observations.


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