World Bank Pushes to Expand Emerging Market Digital Payments

Mastercard and Visa have joined a World Bank initiative to expand digital payments in emerging markets. The International Finance Corporation (IFC), part of the World Bank Group, launched the project on September 9th to help banks, FinTechs, and other financial institutions in these regions increase access to digital payments for consumers and small businesses.

The IFC explained that in some emerging markets, financial institutions face limitations due to regulations, leaving millions of people and local merchants dependent on cash and lacking the benefits of digital payments.

The new initiative is backed by a $700 million guarantee to mitigate part of the credit settlement risk for participating institutions. Mastercard has committed $500 million to the effort. Jon Huntsman, Mastercard's vice chairman and president of strategic growth, emphasized the urgency of this issue, stating that improving access to trusted financial services is more critical than ever.

Visa is contributing to the initiative by sharing credit settlement risk with the IFC, which is projected to provide approximately $200 million in risk-sharing over the next five years. Paul Fabara, Visa's chief risk and client services officer, highlighted the potential of digital payments to unlock economic opportunities, stating that through this partnership, Visa aims to provide secure and reliable payment solutions for more people and small businesses in emerging markets.

Recent research from PYMNTS Intelligence reveals that nearly half of all small businesses would prefer to transition from cash and checks to digital payments. However, many of these businesses continue using traditional payment methods due to practical workflow requirements rather than a lack of interest in digital payments, according to a report titled "Ready for Change: Why Nearly Half of SMBs Want to Ditch Cash and Checks."

The report notes that while many digital payments are instant, cash retains a sense of immediacy in certain segments, supporting day-to-day operations and small transactions, particularly in markets where payments are often made in-person and liquidity management is crucial.