The World Bank has come out with its latest advice, that Governments need to step up efforts to boost the use of digital payments in developing countries to get the un- and under-banked financially included to better grease the wheels of capitalism, writes Billy Bambrough
Claiming that 2.5bn adults around the world (a phenomenal 41% of which are in developed countries) do not have a formal bank account and as a result are holding us back from the capitalist, equal rights utopia that we should all be enjoying in the 21st century.
The World Bank does make some good points.
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The global mobile phone revolution has the potential to give people in many economies the ability to become consumers like never before, while in developed nations people have been healthy, happy consumers long since before being able to buy things on our phones, the phone just speeded things up.
The un-banked population has been an issue banks have been keen to eradicate for a long time. Prepaid cards have been called the financial stepping stone to a full bank account, giving users the opportunity to prove they are trustworthy of a bank account without posing a credit risk to the bank.
M-Pesa is the obvious example of a digital payments success story, and clearly the scheme that the World Bank is hoping to replicate around the world. One issue for the banks with digital payments is that it cuts them out of the system and brings in the telecos, companies that have proved woefully inadequate at providing banking services in many markets.
Using M-Pesa as an example, the service relies on a network of retailers who act as banking agents, without the need to involve the bank. What we are seeing here is banks getting cut out of the payments process and becoming, as they historically have been, stores of wealth; somewhere to dump your money when you no longer need to regularly transact with it.
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By GlobalDataWhile digital payments may be a good way to encourage financial inclusion and help the world move beyond the need for everyone to have a bank account to pay electronically, the move to digital payments will likely cause the number of un-banked people to rise, not fall.
