The International Finance Corporation (IFC), a member of the World Bank Group that concentrates on the private sector, announced the project Wednesday (Sept. 9), with the goal of helping banks, FinTechs and other financial institutions in these markets expand digital payment access for consumers and small businesses.
“In some of these markets, financial institutions are constrained by financial requirements that can limit their ability to participate in global payment ecosystems, leaving millions of people and local merchants reliant on cash and cut off from the convenience, safety, and efficiency digital payments can provide,” IFC said in a news release.
The new initiative addresses this gap with $700 million in guarantee to cover part of the credit settlement risk, allowing more institutions to offer digital payment services to more customers, the release said. Mastercard has teamed with IFC to provide $500 million toward that goal.
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“At a time when economic uncertainty, digitization and shifting global dynamics are widening the gap between those connected to the digital economy and those still left outside it, expanding access to trusted financial services has never been more urgent,” said Jon Huntsman, vice chairman and president, strategic growth at Mastercard.
Visa, meanwhile, is sharing credit settlement risk with IFC, a facility that is expected to support approximately $200 million in risk sharing over five years.
“Access to digital payments can help unlock economic opportunity,” Paul Fabara, Visa’s chief risk and client services officer, said in a company news release.
“Through this first-of-its-kind partnership with IFC, Visa will help financial institutions bring secure and reliable payment solutions to more people and small businesses in emerging markets. Together, we can expand financial inclusion and help more communities participate in and benefit from the global economy.”
Meanwhile, recent research from PYMNTS Intelligence shows that nearly half of all small businesses want to swap cash and checks for digital payments.
However, many of these businesses stick with legacy payments due to practical workflow needs rather than a resistance to digital payments, according to research from “Ready for Change: Why Nearly Half of SMBs Want to Ditch Cash and Checks.”
“Many digital payments may be instant, but in these segments, cash has an aura of immediacy, supporting day-to-day operations and small transactions, especially in environments where payments are made in-person and liquidity is tightly managed,” the report said.
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