Bank cards now account for more than half of all retail purchases in the UK, according to figures from the British Retail Consortium, and Sweden is predicted to become the world’s first cashless society by 2030.
While the UK Treasury considers scrapping 1p and 2p coins as it moves towards a digitalised society, emerging economies – where cash is a complex system – are already ahead of the game because they don’t have access to basic banking facilities. So why is cash such a problem in developing countries?
Cashing in on a digital footprint
No bank account means no personal credit, which can make it impossible to apply for any type of loan or insurance. Imagine a small business owner in a remote area, such as a farmer whose income comes from growing crops. In a cash-based society, they may have to travel miles to the nearest city in order to do their banking, in order to build credit and obtain any form of insurance. The alternative? No insurance and no compensation should anything happen to their farm, putting their livelihood at risk.
But even those with a bank account are struggling. Limited ATMs and constricting bank opening times can create queues just to withdraw the month’s wages, which is crucial if the local economy only deals in cash. This encourages people to save their money and store it at home, taking cash out of circulation and forcing banks to print more money at a cost.
Making banking mobile
New technology is opening doors for small and rural businesses in emerging economies, giving them access to banking facilities. No matter the location, technology is enabling both banks and their customers to address some of these challenges. Not just regionally either, customers and businesses can transfer money between each other and across geographical boundaries – in real time. With platforms that act as mobile wallets, it is possible for customers to make digital transactions while building credit as a result.
Mobile wallets don’t necessarily require such advanced handsets as smartphones either. Mobile banking services can still be used via text message, even on a basic phone, enabling customers to transfer funds, check their real-time balance and statements without having to visit their nearest branch, transforming regional economies.
No phone, no problem
Mobile wallets are just one of the ways in which technology is helping the emerging markets bank better. Agent banking, where agents act as a physical branch but are based in supermarkets, petrol stations, or roadside stalls, means banks can expand their reach and customer base by onboarding new clients that were previously out of reach.
Cashless technology and initiatives such as these are helping small businesses in rural locations to build stronger digital capabilities and better integrate into the ecosystem, all while building a more secure and stable economy.
Becoming a cashless society shouldn’t be feared, as the creation of digital banks is the driving force behind emerging economies. Not only does it keep overheads such as infrastructure low (important in a developing country), but fintech services such as these also increase the security of sending, paying and receiving money. By creating a safe and connected world beyond cash, customers can access banking facilitates wherever, and whenever they want.
By Zoe Baptie, Senior Account Manager