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.
