A common perception when we speak to prospects in cash dominated economies is that mobile payments cannot succeed there. People are too used to using cash, and businesses don’t want more audit trail than necessarily. But are mobile payments really something that is predominantly made for economies with small informal sectors and plenty of credit card use?
To some extent their concern is valid. Greece, Romania, Bulgaria, Hungary and Poland all have informal sectors that are above 20% of GDP. Cash transactions in these countries constitute 60-90% of the total number of transactions, compared to Sweden where only 10 – 15% of retail transactions are made in cash.
In 2018 more Swedes used Swish (mobile payments) than cash in the past month – source: https://www.riksbank.se/
But there are many upsides to those numbers. When launching mobile payments you need to solve critical pain points for both consumers and merchants. If you don’t, you will fail. When the vast majority of the transactions are made in cash, you are competing with cash. And that, to be honest, is easy. The largest (only?) benefit with cash is that it is anonymous and non-traceable (no, cash is not cheap, it costs on average 2.3% of the transaction value). Mobile payments will win over cash in every other category, for example:
More efficient: You reduce the time consuming activity of having to go to an ATM. You have the ATM at your fingertips instead.
New services: Introduce more interactive services like order and pay before you are in the store, which will reduce the time you stand in lines.
Faster: Don’t wait for your change, just pay the exact amount from the start. Oh, and you don’t need to actually carry change.
Mobile payment rates in Scandinavia have proven that the benefits of mobile payments are high in card-dominated economies, but there is no doubt that those benefits are even higher in cash dominated economies.
If you look at some of the most successful mobile payments schemes in the world it is not predominantly card dominated economies that have succeeded. With the exception of Scandinavia, it is in cash dominated economies that you will find the most successful schemes. Just to mention a few, AliPay/WeChat in China, MPESA in Kenya, and PayTM/Tez in India. These schemes have succeeded in large informal sectors because they solve many critical pain points for consumers and merchants (in India only 6.5% works in the formal sector). The benefits far outweigh the few benefits that cash might have.
If you create good payment experiences people will use them, regardless of where. And Auka does exactly that – we help our partners to launch great payment experiences in their markets.
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