46 development
A World beyond Cash is a World of Financial Inclusion
In a world where 85 % of all consumer transactions are still being conducted in cash and cheques, there is an opportunity to harness electronic payments and move to a‘ world beyond cash’ to promote economic growth, innovation and financial inclusion.
Authored by Javier Perez, President, MasterCard Europe
There is a growing consensus around the world that cash is inefficient when compared to electronic payments. The evidence is backed by various studies and demonstrates the range of the cost of cash between 0.6 % and 1.5 % of a country’ s GDP. One such study by Moody Analytics 1, which looked at 56 countries representing over 90 % of world’ s GDP, showed that greater use of electronic payments added an aggregate $ 983 billion in real GDP growth; contributed to a rise in consumption by an average of 0.7 %; and contributed to an average incremental growth in GDP of 0.17 % per year.
Electronic payments also provide an opportunity to expand financial inclusion. Governments around the world, backed by the G20, recognise the importance of financial inclusion as key to economic growth, financial stability and integrity. Financial access has been highlighted as a‘ key accelerator’ to meet the Millennium Development Goals and the key to achieving these goals is financial education.
The Link between Financial Education and Financial Inclusion
According to the World Bank’ s Global Findex database, 2.5 billion adults globally do not have adequate access to financial services. They have no access to safe and affordable ways to borrow, save, invest or transfer funds, and therefore, no way to improve their quality of life. Low levels of financial inclusion create a vicious circle where the lack of financial access promotes high cash, which in turn affects the level of financial intermediation and eventually GDP growth.
Financial inclusion encompasses improved access for the unbanked, availability of better products and solutions, and ultimately, better usage by consumers. The advent of new technologies combined with diversification of products and services has increased the choice and quality of financial products. However, greater quality and choice has not automatically triggered effective usage by customers. The path from access to usage is determined by how knowledgeable customers are about what is available to them. They need to know about product features, fee structures and rewards and incentives associated with the products.
Inclusive Growth Requires Focusing on the Last Mile
We believe that it takes an ecosystem approach to address both the financial access and account usage challenges. There is no single stakeholder in the value chain that can drive financial inclusion alone, deliver a full suite of