Global Progress in Electronic Payment Systems

> Posted by Jeffrey Riecke, Communications Assistant, CFI

Electronic payment systems are spreading so rapidly they’ve become a challenge to size up. Payment cards have been around in some form since the early 20th Century, but their outreach is still far from ubiquitous, even in countries like the United States. To get a sense of where we stand with the expansion of modern payment systems, I compiled some recent statistics from around the world.

In the United States, employers are increasingly using electronic payment cards to distribute compensation. As compared to checks that require processing, the cards receive funds immediately, and can be used like any other payment card to make purchases, transfers, and withdrawals. In 2012, more than $34 billion was loaded onto 4.6 million active payroll cards. By 2017, this is expected to grow to $69 billion over 10.8 million cards.

Electronic payments are experiencing rapid outreach in India in part through the government’s Aadhaar identification card initiative. Increasingly banks are accepting the biometric information-backed Aadhaar numbers as adequate Know-Your-Client information, and as part of its financial inclusion report released last week, the Reserve Bank of India (RBI) Committee on Comprehensive Financial Services for Small Businesses and Low Income Households recommends that every individual over the age of 18 receive an electronic bank account when they’re issued an Aadhaar number. As of December 2013, about half the country’s population had enrolled for the identification cards. The RBI plans to have the entire adult population enrolled in the system by January 2016. Among their utilities, the cards are being used to distribute social benefits of the government’s Direct Benefit Transfer scheme. A recent UBS Securities report estimates that the efficiencies gained from the card-based social benefit system could total up to 1.2 percent of India’s GDP.

Across Sub-Saharan Africa, 14 percent of adults have a debit card, reveals the recently-released Financial Inclusion in Africa report from the African Development Bank. In East and Southern Africa ATMs are the main mode of withdrawal for formal account holders, while in West and Central Africa teller withdrawals are more common. In terms of mobile money, 14 percent of African adults report having used a phone for payment and money management in the past 12 months. In Sub-Saharan Africa specifically, this rate is slightly higher at 16 percent. In Kenya, home of the flagship M-PESA service, 68 percent used mobile money in the past year. Globally, mobile money usage is at 6 percent. It’s important to note that many mobile money users don’t have accounts at formal financial institutions. In Kenya, for example, 43 percent of mobile money users do not. 

The 2013 World Payments Report, a joint initiative from Capgemini Consulting and the Royal Bank of Scotland, indicates strong growth for electronic payments globally. Global electronic transactions grew by 8.8 percent in 2011 to reach 307 billion transitions. In Latin America the increase was 14.4 percent – higher than in previous years. Brazil can be attributed to over 70 percent of the non-cash transactions in the region in 2011, where use of debit cards and credit cards increased by 23 and 16 percent respectively. Latin America’s current mobile money subscriber base of 18 million is projected to grow to 140 million by 2015, according to Deloitte.

With recent growth numbers like these it’s tough to say where we’ll be with e-pay in a few years’ time. All the same, here are two final figures to keep in mind as we strive for improved services and increased inclusion through modern payment systems. MasterCard indicates that social benefits distributed using e-pay will increase by more than 300 percent between 2010 and 2017 to more than $194 billion. Also by 2017, Nilson estimates total payment cards in circulation worldwide will increase from 2011’s 14.4 billion to over 20.6 billion.

Image credit: Alex Proimos

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