Innovative digital payment systems (DPS) are a crucial solution for greater financial inclusion assisting low-income households in overcoming poverty using lower-cost methods for managing their finances. The advancement in internet communication technologies and the arrival of e-commerce and e-business simulated digital payment systems providesvarious electronic payment options such as payment cards, mobile payments, mobile wallets, electronic cash, and contactless payment methods. This chapter discusses the current state of the art in digital payment systems in emerging markets. Also, it analyzes the advantages of DPS in emerging economies, challenges in emerging economies, the economic impact of DPS in emerging economies, cyber security issues in DPS, and the future of the DPS in emerging economies.
TopIntroduction
Digital technologies enable financial services such as transaction accounts, credit, savings products, and insurance to people without limited financial services. They are increasing the speed of transactions, security, and transparency (Bachas et al., 2018). They enable the development of sustainable financial products tailored to the needs of people with meager, erratic incomes. These technologies are lowering costs by maximizing economies of scale by removing barriers to providing financial services, such as lack of identification, formal income, and geographic distance, which are the stumbling block in developing economies (Sun et al., 2016).
In emerging economies, mobile money has leveraged high mobile phone penetration to deliver a 'first wave' of digital financial services. GSMA, a website that tracks mobile money service deployment worldwide, reported over 850 million registered mobile money accounts across 90 countries, most of which are emerging economies. Their day transaction is worth more than $1.3 billion. In their publication of 2020, the World Bank reported that Sub-Saharan Africa is the leader in mobile money (Serrate et al., 2020). It has over a fifth of the adult population with mobile money accounts (UNCTAD, 2020). The report shows that these accounts can provide a basis for more sophisticated financial services, such as digital lending and insurance. In the digital economy, going cashless eases one's life and helps authenticate and formalize transactions. This helps curb corruption and the flow of black money, which increases economic growth.
According to Wakarima (2022), Africa accounts for 70% of the World’s $1 trillion mobile money value. That is almost two-thirds of the global value of $767 billion, according to the GSMA, underlining that the region’s banking future is secured by monetary digitization (Wachira, 2023). Digitization of payments has increased transparency and reduced the cost of financial transactions, leading to greater efficiency and economic growth. Once a payment system works effectively and efficiently, it becomes a game changer to an economy (Wachira, 2023). Increasing the use of electronic payments boosts consumption and GDP. Moreover, the impact increases as penetration rises.
This chapter will discuss Digital Payment technologies, followed by the Advantages of digital payment Systems. The Challenges of Digital Payment Systems will follow, the Economic Impact of Digital Payment Systems, Cybersecurity in Digital Payment Systems, and the Future of Digital Payments Systems. It will end with concluding remarks.