Inclusion Through Technology: How Digital wallets Affect New Markets

December 29, 2022

As we have previously talked in this blog extensively, digital wallets are continuously changing the way we do banking. As one of the most popular ways to pay, the impact this payment method has made ever since it’s genesis in the mid-90s has been enormous. Especially in markets that do not have much access to banking.

The 2022 Global Payments Report by FIS/Worldpay estimates more than four in ten electronic transactions will use a digital wallet by the end of 2025, with over half of online transactions using digital wallets by the end of that period.

Digital wallets are stored on mobile phones and other devices and they are characterized by strong encryption. And its many qualities make it incredibly popular with the younger demographic.

“in developed markets such as the UK, more than 60% of the 18-30 age group use digital wallets, compared to just 12% of those over 60.

The impact on such developed markets doesn’t come as a surprise, however, it doesn’t end there: digital wallets are an asset in emerging markets as well.

For example, NassWallet is amongst the first providers of digital wallets in Iraq as well as a member and card issuer in the VISA network.

In many markets such as Iraq, members of the population remain “unbanked”; nearly 8 in 10 people have no interaction with formal banking systems. However, more than 9 out of 10 people have access to their very own mobile phone. This means markets such as these are viable for digital wallets; they offer the unbanked a range of financial services without needing a bank account.

Evidence from other markets shows how such access helps to foster economic development by speeding up flows of funds in the economy and reducing costs.

According to McKinsey and Col almost 8 in 10 smartphone users do not have a bank account access across the Gulf Co-Operation Council (GCC), however, one-third of consumers in that region do use digital wallets, and that number is climbing every year by about 10%. 60% of consumers surveyed in that region admitted they would prefer to use digital wallets rather than traditional banking methods.

Digital wallets are not only useful for payments; they enable governments and financial institutions to “establish credit histories for consumers, distribute salaries and run aid programmes and unlock the potential for micro-lending and other products.”

NassWallet allows their customers to pay each other directly, pay government and utility bills, and pay in-store using a QR-code at no additional cost. It also allows governments and businesses to pay each other and request payments.

At a macroeconomic level, digital wallets help merchants and banks to transition from cash to electronic payments by encouraging acceptance in-store(...)This brings the benefits of faster settlement, reduced costs and lower fraud risk to the wider economy compared with cash.

In addition, even NGOs are making use of this tool in several ways, even to set up donations and making sure the operations are kept as transparent as possible.

It is clear technology is always supposed to make our lives easier, and fortunately, the access to a smart phone equals access to many possibilities for underserved communities. We are excited to see what other applications digital wallets can have. 

Want to learn more? Check out Payments Cards and mobile’s full write-up here.

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