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? To us at The Fintech Times, fintech for good means companies looking to help people who desperately need it, prioritising financial inclusion and sustainability.
We previously analysed five companies who shared their views on what cash first countries could do to go cashless, and in turn what external players could do to help.
In this article, we hear more views from the industry on how rapid digitisation can be properly implemented to help cash first countries:
Lack of infrastructure means higher adoption rates
Looking at the requirements for successful digital adoption, John Mitchell, CEO and co-founder of paytech, Episode Six said: “In many cash first countries, rapid digitisation is happening by default. Mobile first and digital native propositions require much less infrastructure and hence are adopted quickly, leapfrogging the dated legacy tech. This digital native tech is what’s required, and the proper foundation for much of the crypto ecosystem.”
Crypto is an improvement over traditional systems
Richard Raizes, partner at investment firm, Plutus21 Capital discussed consumer preferences and how embracing innovation was a great way for societies to go cashless: “Cash-first societies can embrace innovation, allowing people to use whatever forms of commerce they want without overly regulating, taxing, or freezing users’ funds. Ultimately users will use what is best for them, so for crypto to be adopted, the user needs to have advantages over using cash. We think this is often true where innovation is allowed to happen.
“Crypto and CBDCs can expand access to financial services and innovation, bringing more access, lower fees, and a better user experience to users.
“Remittances are extremely important as they allow people to use their money internationally to live their lives, engage in international commerce, and support loved ones. Traditionally remittances have been expense, but stablecoins, crypto, and CBDCs could potentially disrupt the industry and make remittances seamless with much lower fees.
“Big players have been slow to adopt crypto so far, but the trend toward cashless societies, often with crypto integrated, will continue because crypto is often desired by the end user because of its improvement over the traditional systems.
“Cash-first societies can embrace innovation, allowing people to use whatever forms of commerce they want without overly regulating, taxing, or freezing users’ funds. Ultimately users will use what is best for them, so for crypto to be adopted, the user needs to have advantages over using cash. We think this is often true where innovation is allowed to happen.”
The success of a society-wide digital transformation is always contingent on free and open access to technology
Till Wendler, co-founder at peaq, a Web3 network, highlights the importance of physical infrastructure for cashless societies: “Digitisation is important, but one thing that often gets overlooked when we think of it is that the digital world is not as ethereal as it seems – it always has to rely on physical infrastructure, server stacks, blockchain nodes, and data cables, to run. The success of a society-wide digital transformation is always contingent on free and open access to technology, and the best way to organise it without letting big platforms dictate their rules is to make sure this hardware is community-owned and governed through permissionless decentralised mechanisms.”
Regulations provide a workable foundation
Strong regulations are at the heart of a strong cashless society said David Wilford, chief legal and compliance officer at paytech, Global Primex: “Likely the most effective way to rapidly and effectively implement digitisation in cash-first countries would be to create a model law/regulatory structure setting forth best practices for consumer protection and privacy, industry security standards, and dispute resolution processes that countries could immediately implement and of course customise to their particular situation. This would provide a solid and workable foundation for many countries who otherwise lack the means or know-how take on such a challenge. The effect would be to reduce the need for cash, and make digital transactions quicker, cheaper and more accessible for its citizens. This could be a project undertaken by an already-existing international group such as the IMF, World Bank, or UN Economic and Social Council that already has standing in the international community and has the resources and structure in place to achieve such a goal.”
Levelling the playing field
Arjeh van Oijen, head of product management at Icon Solutions, the specialist provider of services and technology solutions that are simplifying banking transformation said: “For cash-first countries to benefit from rapid digitisation, levelling the playing field between banks and non-banks and providing access to new participants must remain key drivers. Too often, access is determined by governance of the payments system. In these countries, perceived risk by existing participants and a lack of regulatory intervention results in a failure to develop modern access arrangements. These restrictions for new participants limit the growth of competition in the market as well as the drive for innovation that results from competition. Expanding access to digital payments remains paramount in cash-first societies since digital payments often represent the first point of access for many people to the wider financial system. At the same time, it is important for authorities to promote interoperability between different payment service providers to ensure accessibility and avoid monopolies.
“India’s Unified Payment Interface (UPI), operated by a specialised division of the Reserve Bank of India (RBI) provides a good example of how a swift pivot to digitisation can usher in tremendous benefits for citizens when implemented strategically. UPI separates customer experience from account ownership so customers can use the app of any bank or non-bank for UPI-based payments. This means participation in the underlying infrastructure becomes irrelevant. But at the same time, the standards (like APIs) as defined under UPI ensure full accessibility and easy switching between providers without losing.
“Additionally, the RBI updated the access rules to the Real Time Gross Settlement (RTGS) and national electronic funds transfer (NEFT) systems for non-banks. By extending access to payment systems to more entities, the central bank provides a strong impetus to digital payments, promoting both innovation and competition. This means that authorised non-bank payment system providers, including prepaid payment issuers, card networks and white label ATM operators can participate in central payment systems. Direct access for non-banks to payment systems lowers the overall risk in the payments ecosystem and brings advantages to non-banks like reduction in cost of payments, minimising dependence on banks, reducing the time taken for completing payments, eliminating the uncertainty in finality of the payments as the settlement is carried out in central bank money.”