A NEW STUDY from the World Bank Group and the World Economic Forum estimates the global value of micro, small and medium retailers’ transactions at $34 trillion per annum. An estimated $19 trillion was made in cash and cheques, and $15 trillion by electronic payment means.
“While many foundations and drivers exist for achieving financial access and inclusion, the potential impact of extending the use of digital financial services through a more widespread acceptance of electronic payments among small retailers is substantial,” said Gloria Grandolini, senior director, finance & markets, World Bank Group.
Despite the $19 trillion opportunity to displace paper-based payments, the adoption of electronic payment has been slow and patchy worldwide. The study sets out some possible reasons for this, none of which would be surprising to payment industry veterans.
Cash usage is entrenched in people’s daily interactions and user behaviour is notoriously di icult to change. There may be technical or infrastructure barriers.
The value proposition and economics for electronic payments may be inadequate. Electronic payments is a two-sided market. There may be insu icient customer demand and the distribution models for hard-to-reach merchants ineffective. Merchants may be reluctant to declare or pay full taxes on sales.
The study contends that innovations that go beyond facilitating electronic payments to providing value-added services promise high success. This is particularly the case among small and lower-income merchants. Developed markets may only require adjustments to existing domestic and international card models to reach small retailers with electronic payments.
However, innovators in developing markets, primarily non-bank organisations, will need to create tailor-made models to address barriers and merchant needs. Big and small data, both payment and non-payment-related, will increasingly be used to o er value-added services to small businesses, such as micro-loans.
The report confirms the widely-held belief that the most groundbreaking innovations are occurring where traditional card payment infrastructure is limited. This is particularly the case in Sub-Saharan Africa and certain developing Asian countries. Conversely, in developed markets where card infrastructure is well-established, organisations are looking to tweak the existing card model rather than create a new one.
With regard to distribution models, non-traditional payment actors are well positioned to help acquire and retain retailers for electronic payments in developing countries. This is in large part on account of their existing relationships with small retailers. The study considered customer payments as well as supplier payments, wages and salaries. Suppliers can also take an active role in boosting merchant adoption of electronic payments for their mutual benefit.
“Moving away from cash toward electronic payments can have substantial
socioeconomic benefits. Moreover, substantial business opportunities and avenues for public-private cooperation exist in better serving the micro, small and medium segment,” said Matthew Blake, head of banking and capital markets, World Economic Forum.