Abstract
Digital payments are increasingly becoming popular worldwide, especially in underdeveloped and developing countries, despite the challenges these countries face regarding required infrastructure and digital literacy. Digital payments have emerged as an important tool for governments to distribute the funds for social welfare schemes to their citizens directly in their accounts with zero corruption and delays. Socio-financial inclusion of society's deprived and marginalized section is another advantage of digital payments. Having access to transaction accounts, credit, savings products, and insurance helps the poor raise their incomes and become more resilient. Paperless and cashless transactions are a huge advantage of digital payments. This chapter aims to discuss the impacts of digital payments on the socio-economic factors in emerging markets and developing economies. In addition, it highlights the solution and recommendations for policymakers.
TopIntroduction
Digital payment is a payment method that is based on the Internet, where several transactions can be processed concurrently in an orderly, precise, and productive manner, which increases productivity (B. J. Ali & Anwar, 2021; Chaveesuk et al., 2021). The usage of internet-based modern banking services improves the accuracy and efficiency of money transfer activities. The Digital Payment System (DPS) is becoming increasingly important for enforcing effective monetary policies through financial transactions (Lo Prete, 2022), and its effects on global economic and financial activity are visible (Aurazo & Vega, 2021). Those who opt to use the DPS reap the benefits of a swift and prompt settlement of payments instantaneously, which results in a reduction in both expenses and the amount of time spent (Balakrishnan & Shuib, 2021). Even though it has a lot of advantages, end-users had many problems with it when it was first introduced. These problems included regulatory norms, network issues, secrecy, safety, security, trust, confidentiality (Verkijika, 2018; Yang et al., 2012), and fraud (Chang et al., 2022). These problems led to the DPS not being very popular when it was first introduced. With the government's ongoing efforts to fix these problems and the regulatory authorities working to make the DPS work better, as well as the benefits that end-users enjoy, the system is becoming more popular in developing countries.
Through DPS, governments can ensure that social welfare schemes are delivered 100% to the beneficiaries cost-effectively without involving any middle layer. Indian government’s scheme, “Direct Benefit Transfer (DBT),” is the best example where beneficiaries get their social welfare funds directly in their accounts without going to the banks or post offices (Varshney et al., 2021). This scheme helped the central government of India tackle corruption, which was a lot in this area where beneficiaries never received their 100% allotted funds. Therefore, digital payments can lead to financial inclusion for the marginalized section of society (Allen et al., 2016; Aurazo & Vega, 2021). Transparency is another big advantage of digital payments (Setor et al., 2021a). Digital technologies allow these services to reach people (Sardana & Singhania, 2018) who previously did not have access to them, including nearly two-thirds of adults in developing countries (Pazarbasioglu & Mora, 2020). It is because costs are going down as the technology is making the most of economies of scale. It is also making it possible to create long-lasting financial products that meet the needs of people with very low and unpredictable incomes (Sardana & Singhania, 2018). Technology is making it easier for people to get financial services, even if they don’t have identification or a regular source of income.
Key Terms in this Chapter
Digital Divide: It describes the division between people and places with and without easy access to cutting-edge information and communication technologies. This category includes common household items such as telephones, televisions, computers, and access to the internet.
Digital Literacy: Digital literacy refers to the abilities required to live, learn, and work in a society where communication and access to information are increasingly mediated by digital technologies such as internet platforms, social media, and mobile devices.
Good Governance: The International Monetary Fund (IMF) defines governance as the process by which a nation is administered, considering economic, policy, and legal aspects. The goals of good governance include reducing corruption, including minorities’ viewpoints, hearing from oppressed people during the decision-making process, and actively attending to the present and future needs of the community.
Financial Inclusion: Individuals and organizations are considered to be financially included when they have access to relevant and affordable financial products and services that satisfy their requirements such as financial dealings of all kinds (transactions, payments, savings, credit, and insurance), carried out in an ethical and environmentally conscious manner.
Cashless Society: A system in which paying for goods or services with cash or checks is no longer the norm and is replaced using credit cards or electronic fund transfers.
Economic Empowerment: Empowerment in the economic sphere refers to the capacity to make and carry out decisions that include the management of and distribution of monetary resources. It has a direct influence on the growth of the economy and vice versa. In other words, economic empowerment can be defined as the process of assisting individuals, primarily women from low-income backgrounds, in obtaining the education, training, and job-related skills they require to support themselves and their families.
Emerging Market and Developing Economies (EMDEs): Emerging economies are those of developing countries that are becoming increasingly involved in global markets as they grow. Emerging market economies are those that have some of the features of developed market economies but not all of them. These countries are categorized as emerging market economies.
Digital Payment: A payment method that is based on the Internet is referred to as digital payment, where several transactions can be processed concurrently in an orderly, precise, and productive manner, which increases productivity.