Digital Payments, Real Business: How Latin America and the Caribbean Is Driving Productive Inclusion

Micro, small, and medium-sized enterprises (MSMEs) account for more than 99% of all businesses in Latin America and the Caribbean, generating about 61% of formal employment and 40% of regional GDP (ECLAC, 2024). MSMEs are the heart of local economies yet afforded the least resources to harness the digital opportunity.

However, millions still operate in cash, are without access to credit or technological tools, and remain excluded from the benefits of e-commerce and digital payments. Closing digital gaps is not just a technological challenge: it is a structural opportunity to boost productivity, inclusion, and equity across the region. This calls for inclusive and productive digitalization, learning from good regional examples and a shared regional vision and MSME digitalization roadmap.

Inclusive and Productive Digitalization Principles.

1) Inclusion by Design: Inclusion is not an automatic outcome of technological innovation: it is a matter of public policy and institutional design. It requires building, from the start, accessible, interoperable, and inclusive digital systems, supported by an open public digital infrastructure that combines instant payments, digital identity, and affordable connectivity—especially in rural areas where technological exclusion still limits opportunities. It also means designing with territorial and gender perspectives, recognizing that women, migrants, and young people face different barriers to accessing financial and technological services. Digital and financial education must be treated as a true state policy, capable of generating trust, strengthening capacities, and ensuring that no one is left out of the digital economy.

2) Protection and Trust: Trust is the foundation of any digital ecosystem. Without strong regulatory frameworks and protection mechanisms, MSMEs will not adopt technologies due to fear of fraud, loss of funds, or data exposure. The UN Principles for Responsible Digital Payments are a global guide for safe, inclusive and people-centered digital systems. They cover everything from guaranteeing universal access to affordable and reliable digital payments to protecting funds, data, and user rights. They also promote gender equality, transparency, interoperability between systems, financial education, provider accountability, and public-private collaboration as the basis for trust. Together, these principles form a roadmap to ensure every digital transaction contributes to human development and sustainable financial inclusion.

3) Value and Productive Usage: Sustainable transformation requires digitalization to generate tangible economic value and lasting social well-being. It’s not just about adopting technology, rather using it strategically to boost production, energize trade, and foster prosperity. This means integrating digital payments usage into financial services—such as credit, savings, insurance, and growing market access—so MSMEs don’t just go digital; they grow. It also requires measuring results beyond transaction volumes, assessing their impact on productivity, income generation, formalization, and economic well-being. Finally, it involves linking digitalization with sustainability and climate resilience, leveraging payment traceability to build greener, more transparent, and fair value chains.

© Gisela Davico/PNUD Perú

Digital Inclusion Efforts are Driving Regional Progress

LATAM and the Caribbean are moving toward digital inclusion through strategies that combine technological innovation, public policies, and multisectoral partnerships, generating measurable impacts on productivity, formalization, and economic resilience—particularly for women.

•Peru: The UNDP’s Innova tu Mercadohttps://www.undp.org/es/peru/historias/mercados-que-se-reinventaninitiative demonstrates that innovation can emerge in the most traditional spaces. Market vendors—mostly women—now manage inventories with digital tools, accept electronic payments, and access formal financial services. The result: more resilient businesses, empowered women, and more connected communities.

•Mexico: Strive México—an alliance between UNDP, the Mastercard Center for Inclusive Growth, and various governments—is supporting women entrepreneurs and youth formalize, build credit histories, and expand into new markets.

•Dominican Republic: UNDP’s AI Guide for MSMEs is guiding small businesses on how to boost their productivity through the ethical use of AI. practically, and safely, democratizing access to advanced technologies.

•Guatemala: Anacafé and the Better Than Cash Alliance are collaborating to digitalize the coffee value chain after a recent study revealed that approximately $6.8 million is lost to hidden costs per harvest. Introduction of digital payments can reduce risks and losses, increase traceability, and strengthen the financial autonomy of women producers, who make up about a quarter of the sector’s workforce.

A Unified Regional Agenda for Inclusive Digital Development

To accelerate inclusive digital transformation and deliver shared benefits, Latin America and the Caribbean need a common agenda that combines political vision, technological innovation, and sustained regional cooperation. Three key elements for advancing this regional agenda are: • Regional Interoperability: Payment’s solutions must work across countries and institutions, to reduce costs and friction. Interoperable payments infrastructure can boost intra-regional trade and open new opportunities for exporting MSMEs.

• Digital Governance and Trust: Cooperation among governments, central banks, fintechs, academia and multilateral organizations is essential to establish common standards for consumer protection, data privacy, and cybersecurity. Only trust can drive sustainable adoption or real inclusion.

• Inclusion, Emerging Technologies and Artificial Intelligence (AI): Digital strategies must integrate equity and equality as principles and utilize emerging technologies such as blockchain and AI to swiftly close gaps. Women entrepreneurs, young innovators, and rural communities must have access to tools, leadership, financing, and open data. Well-implemented AI can amplify productivity but requires collective ethical governance and a human-centered approach.

The United Nations Development Programme and the Better Than Cash Alliance have a common goal: to digital financial inclusion of MSMEs an economic transformation outcome that integrates innovation, inclusion, sustainability, and resilience—so that every digital payment strengthens MSME resilience and reaching financial equality in the region.

When we all collectively support digitalization of MSMEs by designing policies, standards, and solutions that improve productivity and livelihoods, the digital financial tools and services can become a true engine of inclusion and shared prosperity to bring tangible results.

© PNUD Perú