New United Nations Study Shines Spotlight on Peru’s Progress on Digital Finance
October 13, 2016
As McKinsey Global Institute reveals a potential $3.7 trillion GDP boost in emerging economies, the report outlines how Peru can continue to advance its digital finance agenda
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Lima, October 13, 2016 – A new report on how Peru is advancing digital payments with recommendations for the future was released today by the United Nations-based Better Than Cash Alliance at “Digitalización de los Pagos de Gobierno en el Perú.”
The event, which featured Alfredo Thorne, Peru’s Economy and Finance Minister, brought together key stakeholders to discuss how Peru can continue its leadership position.
“We’ll work together to create products and digital tools that improve the lives of all Peruvians. Let’s reduce the use of cash, let’s promote the use of digital channels to make payments. Let’s get rid of those formalities that currently require our citizens to leave their homes, businesses and even cities,” urged Minister Thorne.
In “Building from a Strong Foundation: A Path Forward for Digitizing Sub-National Government Payments in Peru”, the Better Than Cash Alliance, which includes Peru as a member, found that the value and volume of electronic payments are growing rapidly. For example, between 2011 and 2015, card payments grew by transaction value by 90% and credit transfers grew by transaction value by 82%.
“This impressive progress is due to the government’s proactive approach to accelerate digital payments and drive financial inclusion,” said Dr. Ruth Goodwin-Groen, Managing Director of the Better Than Cash Alliance.
of Peruvians do not have an account in a formal financial institution
Peru’s prioritization of digital payments to expand financial inclusion is key to supporting the 70 percent of Peruvians who do not have an account in a formal financial institution. It also addresses the relatively large ‘shadow economy’ which largely operates in cash.
The report also highlights the need for reforms to overcome the challenges of a highly fragmented municipal government structure at the sub-national level. Within the 1,838 municipalities there are significant opportunities to move from cash to digital payments. These include digitizing the 77 percent of the property tax payments paid in cash and checks; the 84 percent of the cost to municipalities that are recharged to taxpayers paid in cash and checks, and 19 percent of the government payments to suppliers and procurements paid by checks.
In addition to the Peru report, The Better Than Cash Alliance studied 25 countries, including Peru, India, Nigeria, Tanzania, Ghana, Brazil, and Mexico. The evidence revealed ten ‘accelerators’ or actions that make a strong impact in advancing the creation of economies where digital payments are widely available.
For Peru, the most relevant today to accelerate progress on digital finance are:
- Promote merchant acceptance infrastructure across micro, small, and medium enterprises to deepen usage among consumers and larger payers alike.
- Digitize government receipts to promote comfort with digital payments among individuals and businesses, and ultimately reduces leakages and boosts revenues. Collaboration with private sector is key.
- Implement policies that incentivize and improve the convenience of digital payments to drive faster and more widespread access and adoption of digital payments.
In September, McKinsey Global Institute released projections that digital finance could lead to a $3.7 trillion GDP boost by 2025, create 95 million new jobs across all sectors, and save $110 billion annually in leakages in emerging countries.
“Building a digital economy can take significant work, but as the new data shows, it is completely achievable and will drive inclusive growth, helping people lift themselves out of poverty,” said Goodwin-Groen.
The Better Than Cash Alliance is a global partnership of governments, companies, and international organizations that accelerate the transition from cash to digital payments in order to reduce poverty and drive inclusive growth. The United Nations Capital Development Fund serves as the secretariat. To learn more, visit www.betterthancash.org, follow @BetterThan_Cash.
Angela Corbalan, Head of Communications, email@example.com, (+1) 917 224 9109