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