You’ve Got Money: Mobile Payments Help People During the Pandemic
IMF Blog, June 22, 2020
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- You’ve Got Money: Mobile Payments Help People During the Pandemic
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Bibliographic details
- Authors: Sonja Davidovic, Delphine Prady, Herve Tourpe
- Published: June 22, 2020
Quick summary and context
- The practical challenge of quickly getting financial support to people who lost jobs amid the COVID-19 economic crisis has affected advanced and developing economies alike due to lockdowns, physical distancing, patchy social protection systems, and high informality in low-income countries.
- Many governments are leveraging mobile technology to deliver emergency financial support rapidly and at scale.
Case examples and operational outcomes
- Togo (population of 8 million) distributed emergency financial support to half a million people in less than two weeks using mobile phones; the technology helped deliver benefits to women and supported a transparent rollout.
- Informal workers in Morocco are receiving government help through their phones quickly and efficiently.
Social assistance and cash transfer trends
- In sub-Saharan Africa, over 80 percent of measures announced since the beginning of the pandemic are in the form of transfers, and only 4 percent were labor market policies.
- Globally, 30 percent of all the initiatives taken by countries are cash transfers.
- Governments commonly scale up direct support to households and individuals because they cannot directly protect jobs; missing employment data and blurred lines in the informal sector hinder labor market policy effectiveness.
- When socioeconomic information is lacking, governments face a trade-off between spending more to cast a wider safety net or keeping the budget in check and excluding households in need.
Effectiveness and comparative advantages of mobile money
- Mobile money is described as an effective and physical-distancing-friendly option to deliver cash transfers at large scale because ownership and use of mobile phones in emerging and developing economies is very high.
- Agent network statistics: there are 228 mobile money agents per 100,000 adults compared to only 11 banks and 33 ATMs per 100,000 adults.
- Mobile money facilitates access for rural and remote populations without requiring long travel or bank accounts; this is important where 1.7 billion still don't have access to formal financial institutions.
Country-level responses to strengthen mobile-money ecosystems
- Ecuador doubled the number of licensed cash agents in two weeks.
- Malaysia expanded free mobile internet access.
- Nigeria partnered with mobile network operators to identify vulnerable informal workers in urban areas through airtime purchase patterns.
- Saudi Arabia reduced mobile usage fees to encourage mobile payments.
- Peru previously fostered a platform that allows transfers across three leading mobile operators and 32 banks.
Risks, limitations, and regulatory considerations
- Limitations: rural/remote areas may lack mobile coverage, easy access to money agents, or electricity; exchanging mobile money for cash can be expensive; digital and financial illiteracy hinder adoption.
- Risks: mobile money issued by telecom or fintech firms may not offer customers protections equivalent to banks’ clients; accelerating mobile money raises cyber-risks and digital fraud concerns.
- Policymakers have been forced to react quickly to reduce regulatory weaknesses around mobile money; it is important to ensure risks do not outweigh benefits.
Policy guidance and recommendations
- Adopt a holistic approach that goes beyond technology to consider the whole ecosystem needed for a robust and resilient mobile-money program.
- Integrate all “building blocks” of a sustainable mobile-money platform, including stakeholders and design and policy elements to maximize benefits against risks.
- Use the transition from crisis mode to the “new normal” to:
- Take note of impediments encountered when expanding support during lockdowns.
- Build on solutions that worked best to compensate income losses.
- Focus on sustainable solutions rather than emergency workarounds.
- Incorporate mobile payments into broader government strategies to strengthen social protection systems in the medium term through technology.
Source: You’ve Got Money: Mobile Payments Help People During the Pandemic — Sonja Davidovic, Delphine Prady, Herve Tourpe, June 22, 2020
Content in this bundle
- GSMA-State-of-the-Industry-Report-on-Mobile-Money-2019-Full-Report
- En Special Series on Covid 19 Digital Solutions for Direct Cash Transfers in Emergencies
- En Special Series on Covid 19 Reaching Households in Emerging and Developing Economies