Digital Payments: the main benefits

Digital payment Malta Business pay

Digital payments are certainly our future, but increasingly our present as well. Already, this solution can provide significant benefits to individuals, businesses, governments or international development organizations.

Let’s see below what are the main benefits of switching to the digital world to make your payments.

Cost savings

With greater efficiency and speed, digital payments can provide significant savings over traditional payments. Enabling electronic payments cuts down on administrative and office supply costs. Transactions are performed and tracked online and often batched to a spreadsheet and saved on a flash drive or via the cloud. Receipts are generally delivered via email and short message service (SMS) notifications. This enables companies to save money on materials (paper, envelopes), postage (stamps), printing (paper invoices), and storage expenses. Additional savings may arise in labor costs since fewer humans are involved in handling payments.

In the context of a large business, the cost and delays of payments can often mount up to a serious drain on revenue and resources. That’s why it’s important to adopt solutions to reduce expenses. To that end, the costs of using electronic payment systems representan ever-decreasing cost as the ubiquity of the Internet increases and technology expenses decrease. In addition, modern customers streamlining B2B payments prefer electronic payments for their convenience, as opposed to paper payments that come with risks and delays.

Transparency and security

Security concerns can be addressed with digital solutions. Digital payments enhance traceability and accountability, reducing corruption and theft as a result. Secure digital payments also ensure a greater degree of transparency and accountability. Although cash has been used for centuries, there is little transparency in its usage. Further, it can be a complex task to keep track of your cash transactions, leaving you vulnerable against theft and losses. Secure digital payments through a reliable digital payment system ensure that transactions can easily be traced. Similarly, secure gateways are harder to tamper with, thereby providing an extra layer of security.

The Guidelines on the security of internet payments are based on the recommendations of the European Forum on the Security of Retail Payments (SecuRe Pay), a voluntary cooperative initiative set up by the ECB and comprising relevant authorities from the European Economic Area (EEA) with the aim of facilitating understanding of issues related to the security of electronic retail payment services.

Financial inclusion

By increasing access to a range of financial services, including savings accounts, credit, and insurance products, digital payments can provide greater financial inclusion.

Financial services can help drive development. They help people escape poverty by facilitating investments in their health, education, and businesses. And they make it easier to manage financial emergencies—such as a job loss or crop failure —that can push families into destitution. Many poor people around the world lack the financial services that can serve these functions, such as bank accounts and digital payments. Instead, they rely on cash—which can be unsafe and hard to manage. That’s why the World Bank has made it a key priority to promote financial inclusion—access to and use of formal financial services.

A growing body of research reveals many potential development benefits from financial inclusion—especially from the use of digital financial services, including mobile money services, payment cards, and other financial technology (or fintech) applications. While the evidence is somewhat mixed, even studies that do not find positive results often point to possibilities for achieving better outcomes through careful attention to local needs. The benefits from financial inclusion can be wide ranging. For example, studies have shown that mobile money services—which allow users to store and transfer funds through a mobile phone—can help improve people’s incomeearning potential and thus reduce poverty. A study in Kenya found that access to mobile money services delivered big benefits, especially for women. It enabled women-headed households to increase their savings by more than a fifth; allowed 185,000 women to leave farming and develop business or retail activities; and helped reduce extreme poverty among women-headed households by 22 percent. Digital financial services can also help people manage financial risk—by making it easier for them to collect money from distant friends and relatives when times are tough. In Kenya researchers found that when hit with an unexpected drop in income, mobile money users did not reduce household spending—while nonusers and users with poor access to the mobile money network reduced their purchases of food and other items by 7–10 percent.

Women’s economic participation

Digital payments can provide easier access for women to economic activities by ensuring they have more control over their financial lives and providing them with greater economic opportunities. A G20 GPFI report highlights how digital payments contribute to women’s economic participation.

A 2014 study from the G20, The Opportunities of Digitizing Payments, attributes this impact to increased participation of women in the economy through greater control of finances and budgeting. The 2015 G20 study Digital Financial Solutions to Advance Women’s Economic Participation provides more detail on how digital payments advance women’s economic participation.

And that’s not all. A study in Kenya found that access to mobile money services delivered big benefits, especially for women. It enabled women-headed households to increase their savings by more than a fifth; allowed 185,000 women to leave farming and develop business or retail activities; and helped reduce extreme poverty among women-headed households by 22 percent.

Inclusive growth

In general, the benefits outlined above help unlock economic opportunities for the financially excluded, and allow for a more efficient flow of resources in the economy.

A growing body of research reveals many potential development benefits from the use of digital financial services, including mobile money services, payment cards, and other financial technology (or fintech) applications. While the evidence is somewhat mixed, even studies that do not find positive results often point to possibilities for achieving better outcomes through careful attention to local needs. The benefits can be wide ranging. For example, studies have shown that mobile money services—which allow users to store and transfer funds through a mobile phone—can help improve people’s incomeearning potential and thus reduce poverty. Digital financial services can also help people manage financial risk—by making it easier for them to collect money from distant friends and relatives when times are tough.

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