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LEARNING SERIES >> Working together to prioritize merchant payment digitization and co-create solutions

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Governments, the private sector, and revenue authorities are working towards digitizing payments of small and micro-merchants – not only for its social impact but also for the immense economic opportunity that it offers to the merchants themselves and to the wider ecosystem. Well-intentioned initiatives are several; however, many actors are making individual efforts when success would be higher by working together towards this common goal.

The Better Than Cash Alliance, while working with its members in various countries on promoting merchant payment digitization, has found an opportunity to scale individual engagement in the ecosystem by convening these stakeholders.

In India, Mexico, and the Philippines, our initiatives have helped bringing together a diverse set of stakeholders – federal and provincial government entities, payment services providers, fast-moving consumer goods (FMCG) companies, think-tanks, civil society organizations (CSOs) – on one platform to co-create solutions for the specific challenges faced by the underserved segments of rural and women merchants.

In Mexico and the Philippines, we supported governments in convening a public–private working group to catalyze the retail opportunity on expanding the merchant acceptance ecosystem to drive usage and adoption by small merchants.

In Mexico, the working group recommended the development of a holistic solution in which the entire ecosystem participates to avoid bottlenecks that can generate inefficiencies and limit digital payment acceptance.

Actor 1: Governments | Lesson: Prioritization of merchant digitization in national plans

For emerging economies, merchant payment digitization is high priority. Many governments and central banks have formulated policies, incentives, and regulatory frameworks that permit innovations to thrive and safeguard the end-users: The Cobra Digital (CoDi) platform in Mexico, QR codes and the cash-lite framework in Ghana, and National Financial Inclusion and Digital Payments policy in the Philippines.

While many of these initiatives have been led by the central banks, the digitization of merchant payments falls under the influence of many parties within governments, such as the Ministry of Finance, Trade/Commerce/Industry, Electronics & Information Technology, etc. A common framework helps to define a common vision and creates space for a whole-of-government approach to scale up electronic merchant payments responsibly.

Actor 2: Private sector | Lesson: The national plans and regulatory frameworks should empower the private sector to innovate, partner, and lead on this agenda

The private sector is a diverse group that includes providers such as banks, mobile network operators and fintech; but also, companies, medium and large suppliers; and industry associations such FMCG bodies, chambers of commerce or fintech associations.

The role of providers in designing innovative solutions cannot be overemphasized. From contactless payments, popularized during COVID-19, to interactive voice response and local language solutions, the sector is going through an evolution. However, these providers lack scale and adoption of their solutions because products are not always best adapted to the needs and realities of the underserved small retailers. Bringing fintech in touch with CSOs and communities can help to design for the last mile user’s needs. In India, the largest association of self-employed rural women – SEWA – has partnered with fintech companies to help them customize their digital offering to meet the needs of women merchants in remote parts of the country.

FMCGs and large suppliers play a crucial role in enabling merchant payment digitization in their supply chains. Since 2018, Hindustan Unilever (HUL) has been working on digitizing its retail channels through its flagship digital platform Shikhar, which enables its retailers to order and pay digitally. HUL and the Alliance partnership has resulted in gradually onboarding 3,000 rural retailers and 51 rural distributors in 6 states in India.

In Kenya, Mastercard and Unilever launched the Jaza Duka (fill up your store) program in 2018 to address some of the credit challenges that micro-retailers are facing where credit is based on their history of purchases from Unilever.

Actor 3: Civil society organizations and communities | Lesson: Bridging the trust deficit by working with communities and CSOs

CSOs have a rich experience of working with communities to improve their productivity, income, and livelihood opportunities and understand the challenges firsthand. They could serve as a trusted advisor and bring the community’s pain points to the table for fintech, governments, and regulators to improve their product offering, policies, and regulations, respectively.

In India’s North East region, our recent assessment of the digital payment landscape revealed that failed transactions, lack of internet connectivity, low awareness of the long-term benefits of digital payments, and language barriers are some of the challenges that small and micro-merchants face when adopting digital payments.

In India, Indonesia, Mexico, and Nigeria, Visa conducted an immersive study to understand the obstacles faced by small and micro-merchants.1 While they notice advertising, it requires word-of-mouth recommendations from trusted peers or respected authority figures to pique their interest to learn more. Although costly, an initial face-to-face with a salesperson to help them understand the product in greater detail will help to move the segment towards adoption.

In India, under the leadership of the Ministry of Finance, the Federation of Indian Chambers of Commerce and Industry (FICCI), and the Alliance, 15 leaders from think-tanks, CSOs, and communities identified opportunities and submitted 10 recommendations to the Government of India’s Interministerial Committee on FinTech on making digital payments inclusive and responsible for women merchants.

In Bangladesh, cash payments are still preferred by 80 percent of the customers because of a lack of trust in e-commerce firms and fear of making payments online.2 To build trust in digital payments, the regulator – Bangladesh Bank – has introduced an escrow service: the payment gateway banks and financial institutions will keep the buyer’s advance payment until the e-commerce company delivers the goods and submits a signed delivery document.3

The Financial Inclusion Global Initiative (FIGI) Working Group on electronic payment acceptance has suggested combined incentives from the private and public sectors to reduce the barriers in the adoption of digital payments by merchants.


  1. Visa, Small and Micro Business Immersive Study, https://usa.visa.com/dam/VCOM/global/about-visa/documents/understanding-obstacles-facing-small-and-micro-business-owners.pdf.
  2. Bangladesh Bank, e-Banking and e-Commerce Statistics Unit – Discussion with a2i’s e-Commerce Expert, 2021.
  3. The Business Standard, Bangladesh Bank to Introduce Escrow Service for e-Commerce, 2021, www.tbsnews.net/economy/bangladesh-bank-introduce-escrow-service-e-commerce-267139.

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