The Covid-19 pandemic has accelerated the uptake of cross-border digital payments, making it convenient for small and medium enterprises to continue business and for consumers to purchase goods and services from around the world, but significant challenges persist, experts say.
To overcome future hurdles, the digital payment ecosystem should be made more interoperable so different systems can connect in a frictionless manner, industry executives said during an online panel at the World Economic Forum's Global Technology Governance Summit.
The ability to accept digital payments and connect to the digital financial ecosystem became much more critical as the pandemic developed, they added.
“The pandemic underscored the importance of being digital. Small businesses with digital connectivity recovered fast from the ravages of Covid-19 … others faced the most challenging time,” Demetrios Marantis, senior vice president for global government engagement at Visa, said.
“You cannot live in a world where there is one standard, one system, one payment scheme and one network … different stakeholders should be able to interoperate with one another. It will offer opportunities to small businesses who are relying on digital tools for an economic recovery,” he added.
Digital payments are thriving as users avoided using cash during the Covid-19 pandemic. Globally, digital payments are set to grow to $8.3 trillion in 2024, from $4.4tn last year, according to Statista.
Digital payments offer unprecedented opportunities globally, said Chen Long, director of Luohan Academy, the think tank set up by Hangzhou-based e-commerce company Alibaba.
“In a typical e-commerce environment in China, you have hundreds of millions of online consumers and so many SMEs to serve them … now a small store, which was earlier restricted by space and time, is serving customers thousands of kilometres away.”
“Opportunities that were earlier available to only big companies are now there for small businesses. In fact, digital payments are information of the real economic activity that could be observed and recorded,” added Mr Long.
In the UAE, digital payments have more than doubled over the last two years to $18.5 billion in 2020, according to FinTech company Stripe, which announced its entry into the Middle East market on Tuesday.
Two-thirds of UAE residents expect the country to become fully cashless by 2030, a poll by Standard Chartered showed in September.
There has also been an acceleration in digital payment take-up across Latin America and the Caribbean, Irene Arias Hofman, chief executive of IDB Lab, an innovation laboratory of the Inter-American Development Bank, said.
“From the beginning of the pandemic, nearly 14 countries were offering cash transfer to its citizens through digital payment models … so suddenly 5 million people in Colombia had a bank account for the first time ... and that, too, a digital account.
“We have to take advantage of this situation and become a more inclusive financial model. It should not be limited to only cash transfers,” she added.