This August at The Fintech Times, we’re looking to highlight some of the amazing things fintechs are doing around the world. We are always hearing about the “latest groundbreaking innovation doing good for the community”, but are these innovations doing good for those in an already advantageous position, or are they helping make the financial world more accessible?
While many countries such as Sweden and South Korea have made significant steps toward becoming completely cashless in recent years, there are still many examples of countries across the world where cash is king.
Today, The Fintech Times hears from a range of industry experts about how rapid digitalisation can help in cash-first countries.
Lack of legacy technology can be used as an advantage
Alex McDougall, the CEO of Stablecorp, the Candian blockchain fintech, suggests that the setup (or, in some cases, the lack of) in cash-first countries could be used to our advantage in implementing rapid digitisation:
“A great example of this in the past is emerging nations skipping over telephone landlines and going right to cell phones, which proved to be hugely successful for digitising these nations. As challenging as is to digitise full cash economies, it’s also a huge opportunity because there’s no legacy technology holding them back.
“The banking structure of the world is difficult to scale down, especially when talking about international commerce and the cost of infrastructure, the cost of settlements, and other costs that exist in developed countries. We have the opportunity to start from scratch, a net zero position, or just a cash position in this case; it’s an amazing opportunity to use a lightweight, lean technology like the blockchain. The infrastructure doesn’t need to be built or housed anywhere, all you need is a cell phone and a secure internet connection.
“When we think about how we can best jumpstart a digital revolution in cash-first countries, it’s not about taking existing financial services and figuring out how to slice off pieces of them and deliver those to places that have been traditionally economically challenging to deliver services to.
“Why not start at the other end: there is a predominance of cell phone concentration and internet concentration in these in these areas. Even without a connection, a blockchain transaction works offline and gets posted once a connection is restored. This provides opportunities to have internet hubs that don’t necessarily need truly ubiquitous internet.
“By turning a cell phone into an actual wallet that has all the functionality including peer-to-peer transactions, transact ability of cash, mixed with the privacy, auditability, and all benefits of the blockchain world, we have a really cool start of an evolution away from a purely cashless society into a digital one that is not weighed down by roadblocks traditional finance infrastructures can cause.”
Rapid digitisation can help women-owned business
Gisela Davico-Thaler, global gender lead for Better Than Cash Alliance, a partnership of governments, companies, and international organisations that accelerates the transition from cash to responsible digital payments to help achieve the UN sustainable development goals, explains how the methods of rapid digitisation could be used to support women-owned businesses: “250 million more women were included in the formal economy between 2017 and 2021, according to the World Bank ‘Findex’. That is great news for the advancement of women’s financial inclusion and empowerment; however, there is still urgent work to be done: three-quarters of a billion women remain excluded.
“By driving rapid digitisation through innovative financial solutions and responsible digital payment practices, fintechs can create opportunities for woman-owned micro, small and medium enterprises (MSMEs) and gain a new, engaged customer base. Successful digitisation of payments, whether business or government payments, hinges on prioritising women.
“70 per cent of women-owned MSMEs report inadequate access to growth capital. If financial institutions provided women with SME credit at the same rate as men, that would mean a $30billion additional annual revenue.
“However, bias against female customers by loan officers is common, and in many areas, discriminatory laws prevent women from owning land or property or from obtaining formal identification to open a bank account. Fintechs that design products and services to meet women’s needs or hire more women to service them can contribute to a more inclusive digital ecosystem.
“Super platforms and e-commerce sites can serve an important role in helping woman-owned MSMEs reach new markets and grow their businesses. The flexible nature of e-commerce means women can access economic opportunities, while taking care of other responsibilities such as caregiving.
“Women are also more loyal and enduring clients. In developed markets, 61 per cent of female customers stay more than five years with a bank, compared with 46 per cent of male customers. Fintechs that adapt to women’s lifecycle and changing needs through gender-intentional design will earn a loyal, enduring client base.
“The financial service sector is diverse, and there are countless opportunities for innovative companies interested in tapping women customers. Our organisation recently co-published Reaching Financial Equality, a 10-point action plan to prioritise women’s digital financial inclusion. For effective payment digitisation, there’s no more powerful first step than increasing access for women.”
Blockchain and digital payments can be used for fast-forward progress
Irina Berkon, chief financial officer at global crypto trading platform Metallicus commented: “Blockchain and digital payments are ways for cash-first countries to leapfrog over weak legacy financial rails and deliver innovative services to anyone with a smartphone including the unbanked – much in the way many countries built out mobile telecommunications infrastructure to leapfrog over antiquated and poorly distributed fixed line telephone services.
“Blockchain also offers better solutions for increasing the security and resilience of financial systems to quickly digitise the economy in cash-first countries:
“1) Deploy decentralised identity on-chain solutions to overcome a major barrier to financial inclusion – the need to ensure everyone has a digital ID that satisfies KYC compliance where needed while protecting individual user privacy.
“2) Reduce the risk of digital bank runs through stablecoins that benefit from systemwide collateral and transparency on various blockchains to protect the one-to-one peg to the dollar or other fiat currency.
“3) Eliminate friction like gas fees that increase transaction costs and high energy consumption and carbon footprints so that digital assets and the economic activities they power can scale sustainably and cost-effectively.”
A complete redesign will be required for new systems to succeed
Ritesh Tendulkar, chief innovation officer at, payments-as-a-service platform, Modulr explained: “Digitisation is not the answer, we need digitalisation. Digitising non-digital things has led to slow, inefficient and expensive systems that cost billions a year in maintenance and fraud and are often exclusionary. For example, physical credit or debit cards were not designed to spend online, they’ve been converted and have subsequently needed additional authentication initiatives to make them effective; there are cheaper, quicker and safer online payment methods that could do the same job.
“We need to build better for the future rather than convert what we already have. And that means transforming our payment systems from the plumbing up, and design-in inclusivity at the heart of this new system. Time will tell if CBDC plays an active role in the future system.”
The financial system is bridging the gap for cash-first customers
Erik Poch, managing director of digital, at international money transfer company Ria Money Transfer, said: “Some of the regulatory barriers to digitisation are being lowered and we have some great examples of improvements in digitisation for payments in low and middle-income countries, like the Pix instant payments platform Brazil’s central bank launched in 2020. The Brazilian government used Pix to distribute pandemic relief aid that resulted in 70 million new accounts, many by people who didn’t previously have a bank account.
“Some countries are helping to lower barriers to entry by setting up sandboxes or creating specific programs to help new entrants navigate the regulatory landscape. It takes a joint effort between the public and private sectors to bring change.
“Cash is not going to go away but we can build trust in the financial system and help bridge the gap. One of the key shifts recently is that wallet capability is really starting to take off. We’re starting to give digital tools to cash-based customers so someone can walk into a location with cash and load it into a wallet.
“There are still some important barriers to overcome before we can talk about a cashless world, but we’re making progress.”