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In 2011 the National Bank of Rwanda (BNR) initiated a payment system implementation project (Hybrid RTGS/ACH and CSD) which was completed before the end of the same year and resulted in the significant improvements in payment services at a national level. and set the foundations for digital transformation.

It is interesting to see that when it comes to digital transformation, emerging markets can actually be ahead of the market. Developing countries are leapfrogging to the next level while developed countries have to deal with the burden of infrastructure, heavy regulation, entrenched business practices etc. that slow down the process of transformation. Transformation in developed markets has become drowned in continuous discussions about how to progress, alongside attempts by government/regulators/innovators to convince market players to evolve faster.

Financial inclusion

What is actually happening with the digital transformation of financial services in developing countries? When we talk about digital transformation in many of these markets, there is a sharp focus on financial inclusion. Why? The majority of the population in these countries are unbanked due to a variety of reasons e.g. lack of education, lack of infrastructure, cost of banking services.

While digital banking is not the norm yet in these markets, there are clear trends in how digital payments are being implemented to help with the task for financial inclusion.

Let us take a look at some examples:

Indonesia (GoJek, GoPay)

In 2010, Indonesian start-up GoJek was created. Originally it aimed to digitalise transportation services and make it more affordable and easier to use for people in Indonesia. Before GoJek was created, every city of Indonesia had individuals with motorbikes, called ‘ojeks’, who provided transportation for a small fee that was negotiated on the spot. GoJek created a platform to enable customers to request the same service via a mobile app.

After a very short time, GoJek became a major player within the transportation market of Indonesia, with millions of ojek drivers registered on the platform. It has resulted in more convenience for customers when ordering transport and has resulted in an increased number of orders for ojeks. Effectively, GoJek has disrupted an imbedded industry in Indonesia.

What happened after a few years is quite remarkable. GoJek introduced additional services, including GoPay, a mobile wallet which was instantly provided to every GoJek client – suddenly millions of people could access an instant payment solution. Businesses/Merchants adapted fast as well – GoPay started to be accepted almost in all shops in Indonesia. Drivers started to ask clients to pay via GoPay, refusing to accept cash. Clients started to use GoPay not only to pay for rides but to pay for utility bills and order such services as food delivery, movers, groceries etc. and to transfer money instantly within the GoJek/GoPay network. GoJek disrupted the financial industry and transaction banking.

Indonesia is now one of the hottest battlegrounds with banks, telecommunications companies and fintechs competing and collaborating.

Bangladesh (bKash)

bKash (Bangladesh) was created as a joint venture of one of the major banks in Bangladesh and several investors in 2010. Different from GoJek that started within the transportation industry, this project was aimed to help Bangladeshis transfer money and pay for services instantly. bKash’s active user base grew almost as fast as the speed of money transfer within the system. After a short time, bKash took the Bangladeshi market by storm. Money transfer from/to rural areas of the country became affordable, reliable and instant. A few competitors have tried to repeat this success but in vain. Banks have been aiming to compete with bKash and the financial sector of Bangladesh is being forced to innovate.

Malaysia, Thailand, Cambodia and Vietnam

Malaysia, Thailand, Cambodia and Vietnam are all moving forward in their digital payment journey. Malaysia and Thailand introduced regulations in 2018 while Cambodia and Vietnam are still in the process of implementation of their instant payments systems. Those systems have been developed by central banks to provide instant payments services on a national level to banks, non-banking financial institutions, individuals and businesses.

It doesn’t matter how these projects were initiated or by whom, but they bring challenges for the traditional financial services providers. Banks are being forced to adapt and innovate. There is little choice in these markets but to digitalise banking services and to introduce new products for the population.

All the above cases show how the introduction of digital payments on a mainstream level helps the further digital transformation of the financial sector. Digital payments are an effective gateway to further digital financial services such as KYC, Credit, Insurance etc. As digital payments gain further mainstream usage in emerging markets you can expect the further acceleration of digital transformation for businesses and consumers.


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