What COVID-19 impacts on DFS are here to stay?

Everyone in the DFS realm is thinking about what COVID-19 means for digital ecosystems — today and in the long term. This week, we were pleased to organize and participate in a breakout session for the Global Digital Development Forum. Our compliments to TechChange, USAID, and all of the conference sponsors for pulling off a successful first virtual 16-hour global conference! 

Our team members from Ghana and Uganda joined with our friends at MicroSave (MSC) in India and Kenya to discuss six key DFS tipping points in a breakout session moderated by our CEO Shelley Spencer:

1. Increased challenges for DFS during COVID-19

2. The readiness of markets for digital government-to-person payments

3. Accelerating DFS for contactless and remote transactions (such as merchant payments)

4. Protecting consumers from scams

5. Short and long term impacts on agents

6. The impact on digital lending

SIA and MSC panelists identified common challenges and some unique opportunities across the four countries. In India, Abhishek Anand of MSC shared that banking agents providing cash-in cash-out services have been deemed essential. This has raised their standing and profile in the country but also introduced risks of security and safety. In Ghana and Uganda, SIA’s Wisdom Alorwuse and Andrew Kasujja reported accelerations in digital merchant payments that could lead to a broader economic transition to an inclusive digital economy and the growth of e-commerce. Wisdom also highlighted the timely launch of Africa's first Universal QR Code by the government of Ghana in March 2020, making it possible for all merchants, service providers and institutions to instantly receive payments from bank accounts, ezwich accounts, mobile money wallets or internationally issued Visa or Mastercards. The development will further promote contactless payment delivery across financial service providers in the country. In Kenya, Anup Singh of MSC talked about how the stalwart mobile money system, Safaricom’s M-Pesa, is showing signs of stress at the agent level and the vulnerability of digital lenders using the system for quick loans. 

Key COVID-19 responses by central banks and DFS providers (such as waiving transaction fees and increasing transaction caps) are impressive and favorable initiatives that will contribute to preventing contagion and promoting digital transactions.

Governments in each country were quick to encourage the use of DFS over cash and person-to-person financial transactions when COVID-19 struck — a show of the advancement of DFS ecosystems as a model for financial delivery. Post COVID-19, payment regulators must work with providers to develop strong incentives to drive merchant acceptance. As these countries continue to navigate the phases of the pandemic, we have an opportunity to improve digital inclusion, but it’d be wrong to assume these services are readily accessible for use by all. Attention must be paid to the challenges and roadblocks at play. Cash-in cash-out agents are still a distribution channel that must be protected and supported to withstand the storm of COVID-19 — whether that be by offering stimulus packages or distributing personal protective equipment such as nose masks and sanitizers. Approaches and recovery funding needs to build capacity and provide support for those who remain new to DFS as well. This will be essential in ensuring safe and effective use and to sustain the long-term viability of these systems, whose economics depend on transaction fees. 

View the session recording, or download the slide deck.