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Digital wallets: supporting financial inclusion in frontier markets

Digital wallets: supporting financial inclusion in frontier markets

As one of the world’s most popular ways to pay, digital wallets have had a remarkable impact in the last decade. But as Waleed Khalid, CEO at NassWallet explains, their positive effect is especially profound in emerging economies.

Digital wallets: supporting financial inclusion 

Since their creation in the mid-90s, digital wallets have become one of the world’s leading ways to pay.

The 2022 Global Payments Report by FIS/Worldpay estimates[1] 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.

Secured by strong encryption and tailor-made for the online world, digital wallets are stored on mobile phones and other devices.

They combine payment functions (credit, prepaid and debit, micro-loans) with other options such as loyalty programs, government payments, utility bills and more.

They’re also overwhelmingly popular with young people: 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[2].

While the impact of digital wallets in major economies is widely understood, their effect on emerging markets is less widely appreciated. In addition to the benefits digital wallet users everywhere enjoy, wallet users in emerging economies realise a number of social, financial and economic benefits.

NassWallet is one of the first providers of a digital wallet in Iraq and a principal member and card issuer in the VISA network – as such, we have observed these benefits and their transformative effect on the economy first-hand.

Social transformation through inclusion

In many emerging markets, significant segments of the population remain unbanked. In Iraq, for instance, almost eight in ten people have little to no interaction with the formal banking system[3] – however, more than nine out of ten have their own mobile phone.

This makes such countries viable grounds for digital wallets.

“Digital wallets offer the unbanked access to a range of financial services via their mobile device 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.

Across the Gulf Co-operation Council (GCC), almost eight in ten smartphone users do not hold a bank account, according to McKinsey and Co[4].

Despite this, one-third of consumers in that region now use digital wallets on their smartphones, a figure that’s growing at around ten percent each year.

What’s more, 60% of GCC consumers say they would prefer to use digital wallets for payments rather than traditional banking methods.

 “Where digital wallets penetrate emerging economies, growth proliferates.”

Beyond their use in payments, digital wallets 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.

Using NassWallet, consumers can pay each other directly through our peer-to-peer payments function, as well as pay government and utility bills, and pay in-store for their daily needs using a QR-Code at our merchant network without any extra cost while accessing their cash at more than1,000+ agents across Iraq.

Conscious of the need for consumers to engage with governments, our wallet also enables governments and businesses to make payments to each other and request payments from consumers.

During the COVID-19 pandemic, this function was clearly a life-saver for the most underserved customers, giving them access to financial services.

Despite closures and restrictions on movements, we distributed over 60bn Iraqi Dinar to more than 400,000 beneficiaries as part of the Government and Central Bank of Iraq’s ‘Minha’ aid disbursement programme.

“At NassWallet, we’ve enabled P2P payments, cash distribution on behalf of NGOs, merchant payment, bill payment, e-voucher sales and other functions.”

As many emerging markets benefit from the financial aid and technical expertise of non-governmental organisations (NGOs), we are enabling NGOs to focus on tracking the disbursement and use of funds to make sure that donor funds are used for their stated purpose, enhancing the accountability of donor investments and improving transparency.

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 partnership with our government, the international donor community and Iraq’s banks and merchants, we are looking forward to building a modern, vibrant economy based on digital payments and wallet technologies.

To find out more about how NassWallet is transforming payments in Iraq, please visit: www.nw.iq

[1] Worldpay/FIS, “The Global Payments Report 2022

[2] PYMNTS.com, 24 August 2022: “UK mobile commerce – digital wallet use soars

[3] Fitch Ratings on Iraq, 7 July 2022

[4] McKinsey and Co, 23 August 2021: “The future of payments in the Middle East

 

The post Digital wallets: supporting financial inclusion in frontier markets appeared first on Payments Cards & Mobile.

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