Are digital economies more inclusive?
This question was presented as the concluding question and panel discussion for participants of the 2020 DC Fintech Week.
Christopher Brunner, a Georgetown Law professor, moderated the discussion between Visa’s Global Head of Government Engagement Demetrios Marantis, United Nations Capital Development Fund general manager Sabine Mensah, and International Finance Corporation Digital Finance Specialist Matthew Saal.
Their answer? A resounding yes.
Mensah, who is based in Senegal, not only believes that digital economies are more inclusive, but that the Covid-19 pandemic has accelerated the recognition of their importance and adaption.
Mensah explained most business transactions occurring in Senegal occur in a physical marketplace and are done entirely in cash ranging from clothing, household goods, and agricultural purchases.
“It put our economy at a significant disadvantage during the COVID-19 crisis when you were told to go home and stay in your house and not be able to go to market, earn your money, or sell your goods,” said Mensah. “It was really a wake-up call to many folks here in Senegal.”
The biggest challenge to digitalization, especially in rural communities ranging from West Africa to western Kentucky, is establishing a digital infrastructure and ensuring access to consistent electricity, electronic devices, and educational resources, and information about the benefits of digitalization monetary transactions.
“I once had an agent here in Senegal that had to climb into a tree and raise the phone into the sky to complete the transaction,” explained Mensah. “Not to mention the countless many that had devices but no electricity to charge it or keep the other equipment plugged in, making it useless.”
Fortunately, the United Nations and Mensah have not been alone in recognizing some of the gaps preventing the digitalization of monetary transactions.
In June, Visa announced an initiative to enable 50 million small and micro businesses to become digitally enabled in hopes of closing the gap between companies struggling and those that are thriving during the COVID-19 pandemic.
The Visa Foundation has also further expanded its efforts to close the digitization gap between women and minority-owned businesses.
“We are greatly committed to this partnership and closing the digitization gaps that exist so our businesses and partners can continue to thrive during this pandemic and beyond,” said Marantis.
However, further digitization efforts require more than just the private sector. Government organizations are needed for support.
Some of the ways that governments can help could be to provide some regulatory clarity and create an environment that allows new players to enter and improve the space, explained Saal.
There’s even a silver lining for governments in the form of increased tax compliance, as evidenced in Tanzania, where an online option yielded an increase in payments.
“In the future, there will be many innovations to include maybe a completely online system that doesn’t require agents,” said Saal. “But until then, we have much work to do ahead, and banking and financial services will continue to create models for agent banking and beyond to close that divide.”