Uptake, Use, and Inclusion Gains from Fast Payment Systems: Early Comparative Data

Introduction

In recent years, there has been growing discussion about digital public infrastructure (DPI)—systems such as digital identity systems, alternative payment methods, and data exchanges that are backed by governments through ownership, operation, or direct or indirect control or support. DPIs are often aimed to promote financial inclusion across a society. One central element in the DPI revolution is government-backed faster payment systems (FPSs) that enable instant transfers between bank accounts on a specific payment rail (for the purposes of this paper, FPSs refer to retail payments). According to the World Bank, as of June 2023, some 100 countries had or were implementing an FPS system. Some prominent examples of government-backed FPSs include India’s Unified Payments Interface (UPI) and Brazil’s Pix.

These payment systems have generated a great deal of interest around the developing world and the development community as a means to promote financial inclusion. However, analysis of inclusion gains and other benefits from FPSs is still nascent, and, so far, analytical lenses have been quite myopic. For example, FPSs have typically been analyzed in a case study format, without comparisons to each other, even though there are many types of FPSs and not all are government led. For example, some, such as Sweden’s Swish and the United Kingdom’s Fast Payments, are led by the private sector, while others, such as Thailand’s PromptPay, are co-led by the public and private sectors. In addition, FPSs represent only one potential payment system that can help promote outcomes that governments desire, such as digital payments use, access to finance, and cross-border trade. Comparisons to other models are required to assess the relative contributions of FPSs on these elements.

The purpose of this brief, based on a longer Nextrade Group study, is to promote data-driven, policy-relevant discussion on the role of different types of FPSs and other payment systems in inclusive development. The paper explores various types of data to start shedding light on the impact of FPSs on digital payments use, access to finance, and participation in cross-border trade among consumers and small and medium-sized enterprises (SMEs). It also seeks to raise questions for future research and provide recommendations to policymakers interested in building FPSs.

The following section reviews the wave of digital payments adoption and use over the past decade. The third section assesses the role of FPSs in these developments and the impact of FPSs on the ability to pay, access financing, and engage in e-commerce and trade for both consumers and SMEs. The final section concludes with policy recommendations.

A Decade of Digital Payments Adoption

Multiple types of payment systems and methods have emerged around the world over the past decade. As of 2014, using digital payments typically meant using debit and credit cards, but by 2017 many countries, especially in Africa, started to experience striking growth in mobile payments through systems created by telecommunications companies. In these systems, an unbanked user could top up a wallet on their mobile phone by paying an agent in a kiosk with cash, thus permitting them to transact digitally with their peers (Figure 1). The pioneer in this mobile payments revolution was Kenya’s M-Pesa, launched in 2007. Since then, companies such as MTN Mobile Money and Tigo Pesa have enabled mobile payments in multiple African markets. Similarly, in Bangladesh, mobile payment platform bKash, developed by a fintech firm, has enabled millions of unbanked individuals to engage in digital transactions.

By 2021, the rise of new payments systems had become even more visible, with many African countries featuring high digital payments use but low card use and bank account ownership rates. Some countries also “had it all,” growing in terms of users of card and non-card payments simultaneously. These included, for example, China via fintech Alipay and Kazakhstan through its “super app” Kaspi.kz, both of which have also promoted card payments by allowing users to link their cards to the platforms. In Thailand, e-wallet TrueMoney and FPS PromptPay grew popular amid a rapid rise in bank account ownership and card use.