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How government can drive digital payments

The benefits of digital payments for businesses and consumers mean many governments are looking at ways to promote the uptake of digital payments, as well as the development of new services that could benefit the overall economy.

We’ve covered some of the interesting digital payments use cases of governments and public sector organisations in a previous blog. But what efforts are being made to drive the uptake and development of digital payments and associated services?

Financial services sandbox (South Korea)

In April, South Korea’s Financial Services Commission (FSC) announced the first group of financial service providers given access to its financial regulatory sandbox, which was launched when the Special Act on Financial Innovation Support came into effect on 1 April.

Nine firms were given access to test their innovative services and products in the regulatory sandbox. These included KB Kookmin Bank, Shinhan Card, NH Property and Casualty Insurance. More organisations will be given access to the sandbox with the FSC considering further applications.

Among the products and services being tested are digital payments, peer-to-peer financial services, mobile payments, credit card payments using QR codes and blockchain technology – with a project focused on providing stock lending and borrowing services for individual investors using blockchain.

Compulsory digital payments (Egypt)

Egypt recently implemented a law requiring most payments to government, and most salaries and fees paid out by public and private bodies, to be made electronically.

The move is intended to eliminate the use of cash for such transactions to improve efficiency, promote the shift to digital finance, bring greater transparency to transactions and minimise opportunities for corruption.

The E-Payments Act, which the country’s parliament voted for in March, does not affect payments below 500 Egyptian pounds (US$29), which can still be made using cash.

Central Bank of Egypt is also promoting a national e-payment card. Meeza cards can handle all government payments and can be recharged through banks or ATMs. Egypt’s Ministry of Finance has also reportedly installed 7,000 point-of-sale (POS) terminals at government offices, universities and registration offices.

Financial incentives (Japan)

Japan currently lags behind in terms of digital payments uptake, with consumers loyal to paying with cash. Around 65 per cent of payments in the country are with cash, more than twice the average of 32 per cent among other rich economies, according to a study conducted by the Boston Consulting Group.

The 2020 Tokyo Olympic Games offers an incentive to increase acceptance of digital payments as thousands of people flock to the country for the event. To boost the nation’s use of digital payments by 2025, the Ministry of Economy, Trade, and Industry released its ‘Cashless Vision’ report in April 2018.

One of the initiatives in the report is a points programme to encourage small retailers to accept digital payments. From October this year, consumers paying with credit card, e-money and other non-cash methods at small and midsized outlets will receive points worth five per cent of the purchase price. The government has also announced tax breaks and subsidies for SMEs to encourage them to adopt digital payment systems.

A digital payment vision (India)

The Indian government’s Digital India programme is a vision to transform the country into a “digitally empowered society and knowledge economy”. Increasing uptake of digital payments is the highest priority for the programme, as part of efforts to enable every section of the population to access “seamless digital payment” in a “convenient, easy, affordable, quick and secured manner”.

The efforts include setting a target for digital payment transactions through a unified payments interface (UPI), unstructured supplementary service data (USSD), Aadhar Pay, Immediate Payment Service (IMPS) and debit cards.

The Ministry of Electronics & Information Technology is working on various strategies and ideas with multiple stakeholders including banks, central ministries/departments and states, to create an ecosystem to enable digital payments across the country. The ministry is also working to strengthen digital payment infrastructure and boost awareness.

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How government can drive digital payments
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