Why eCash is a serious driver of financial inclusion
According to the World Bank, financial inclusion means having access to financial products and services such as transactions, payments, or savings which are necessary to fulfil an individual’s or a business’ needs. But why is financial inclusion an important topic for payments companies? And why is the digitization of cash so important to boost financial inclusion and diversity? Here is what Robert Albrecht, Head of Paysafecash, thinks about it.
Robert, in June we celebrated diversity and inclusion in our private and professional lives. What do those terms mean to you?
Robert Albrecht: Being born and raised in Eastern Germany, growing up in a freshly re-united nation and having worked on three different continents, I have often witnessed prejudices towards people with different heritages and backgrounds. At the same time, I have also experienced extreme openness and warmth. Today, I try to be the human being, the manager, and the employee I would also want to see in others. Luckily, diversity and inclusion are some of the core values of my work at Paysafe as we have colleagues from over 30 countries in our Vienna office. So, my work environment is diverse and open to personal and cultural differences which is highly enriching and in harmony with the idea of inclusion.
In the payment industry you see stunning connections to diversity and inclusion. Many of us only think about gender equality, equal rights for people of different races, sexual orientations, or religions in the workplace as relevant areas of D&I. And all of this is highly important and worth discussing.
However, this does not present the whole picture. If you explore what finance companies do to support financial inclusion and diversity for their customers, the topic becomes more complex. Certainly, part of my role is to focus on how we can support businesses to promote financial diversity and inclusion through online cash payments. And I see a huge potential here for the future.
So where does financial inclusion start?
Robert Albrecht: In all everyday payment processes. When you buy a new pair of shoes online, top up your digital wallet, or deposit money at your bank, you might not see the relevance of financial inclusion unless you are a cash-based consumer who cannot use traditional banknotes online. Even though many of us are digitally savvy customers who do not use cash daily, reliance on this means of payment still determines the buying decisions of large groups of consumers.
To put it into perspective, worldwide there are roughly 1.7 billion people who due to numerous reasons are unbanked. This means that they do not have a bank account nor possess either a credit or debit card. They cannot pay for products and services online and are therefore automatically excluded from the digital financial or eCommerce world.
Are there geographical differences in financial inclusion?
Robert Albrecht: For sure. Everyone immediately thinks of Africa or parts of Asia in this context. But we should not overestimate access to online financial services in so-called developed countries. I have been asked this question many times and the data supports the fact that cash still plays a crucial role in many countries, including in Europe. It’s true that only 8.4% of all POS transactions in Iceland and 12.8% in Sweden are done in cash, but it is also true that in countries such as Greece, Moldova and Bulgaria the numbers look different: 75%, 81% and 81%, respectively.
Here is another example. Did you know that not even 50% of eligible Austrians have a credit card? And Austria is in the leading group in Europe when it comes to economic development.
The global pandemic has also shown that in times of crisis the importance of cash increases. Data published by Statista in April this year shows that cash circulation at the beginning of COVID-19 reached its highest level since 2008.
In addition, in economies which are considered well-developed Austria, Ireland and Germany, cash is still being withdrawn from ATMs in higher values: up to 140 EUR per withdrawal on average.
Besides, the meaning of cash for financial inclusion cannot be reduced only to eCommerce. It has an increasing relevance in different areas of financial services, including deposits to digital bank accounts and top ups for digital wallets.
In one of your recent articles you conclude that cash payers should be an especially important customer group for challenger banks. How can those banks support diversity and inclusion?
Robert Albrecht: Very simply – by enabling digital cash deposits and giving cash-payers an opportunity to participate in online financial systems including digital banking, without forcing them to abandon cash which is the payment means they rely on and have access to. Some leading challenger banks have realised the importance of different payment solutions and are already enabling their customers to deposit money and top up accounts with cash. It also brings them one step closer to becoming the primary bank partner for their customers.
Is implementation of cash into online financial systems the only missing aspect of boosting financial inclusion?
Robert Albrecht: No. Financial inclusion is much more than only accepting cash online. Financial inclusion starts with financial literacy. People must know how to save, deposit, spend, invest or lend money to become equal partners in the digital financial ecosystem. Lacking knowledge leads to a lack of trust. So “sense of security” when dealing with money is crucial. To convince both consumers and businesses to make and receive online cash payments conveniently for both sides, security and protection of transactions must meet the highest standards and be intuitive to understand.
Just take a look at our recent Lost in Transaction report for a clear picture on this: although in general consumers are less anxious about the security of online transactions than they were in the past – 40% in 2021 versus 48% in 2020 – they do not want to lower security standards just for the sake of simplifying digital payments. We must keep in mind that including cash-payers into digital finance cannot be done at the expense of security compromises, otherwise the results will be counterproductive.
eCommerce, financial services – where else do you see gaps in financial inclusion and diversity which could be closed with the help of digital cash?
Robert Albrecht: Wherever we see a higher participation of cash-based customers. One example: convenient, secure, and simple money remittance with the use of cash is another part of the discussion. Given that roughly 8% of the total EU population lives outside their home economies, and the numbers for the U.S. and Canada are much higher – 17% and 22% respectively – the need of transferring money cannot be overlooked.
eCash might not be the solution for every single problem, but it can support people sending and receiving money across countries in a safe and guaranteed way. For me this can be an additional important driver of financial inclusion and diversity. Highly developed fintech and payment companies focused on growth should keep that in mind when thinking about scaling and winning new clients, especially among cash-based consumers. Our mission at Paysafe eCash is to “enable everyone to pay online” and I think that it sums up attitude towards financial inclusion in a clear way.