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8/12/2019 7:53:45 PM 


Cash goes Digital: The rise of FinTechs

The digital economy also means a move towards transparency. In the Nordic countries, cash is almost disappearing and used eventually in very small transactions. All shops no matter how small, even you local Seven Eleven accepts debit cards. This was not so in Spain (at least in 2015) where I learned the hard way that transactions under 5 EUROS should be paid in cash apparently due to high banking commissions. In Argentina, which is very much behind in matters of transparency, the AFIP (Federal Tax Office) has recently passed a law to make it mandatory for all shops to accept debit cards. Yet, changes take time as the population acknowledges the need to move towards a transparent economy.
In that sense, payment mobile apps, also referred to as mobile wallets, have appeared to disrupt the payments market. They are cheaper and more accessible and appear as a major driving force of change. While digital natives may very easily pay with apps, older generations have a harder time adjusting to the new technology. This is known as User Adoption: "a situation in which users adopt a system that works to fill a specific need. They transfer from an old system and adopt a system that is newer, better, faster, more comprehensive, and altogether more efficient". User adoption rates vary across cultures, subcultures, regions and generations.
In Norway payment app Vipps has disrupted the payment market, going into a parallel adoption strategy as debit cards are eventually replaced by mobile wallets for payments. In a similar fashion, in Argentina Mercado Pago app is slowly being adopted, especially amongst younger generations. A population used to paying in cash, Mercado Libre's founder Marcos Galperin (one of Argentina's five unicorns: a financial term used to describe tech companies valued at over 1 billion USD) explains a Phase two in his Mobile Payment App Strategy: this will involve that unique QR Codes will be used regardless of the mobile wallet technology, meaning there will not be a QR Code per company but unique QR Codes that can be used across mobile payment companies. This will add to popularize the payment method and simplify the existing system.

The difference in strategy from a parallel adoption to a phase strategy responds to slower user adoption rates in Argentina and Latin-America compared to the Nordics. Being early adopters, cash is almost disappearing in the Nordics. Moving from a cash economy towards a digital economy will take much longer in LatinAmerica. Argentina for example, presents a poor 15% Loan / GDP ratio and more than 50% of the adult population is not even in the banking system! This is explained by the one third of the working force that is employed "in black", and a similar 50% of the economy that is managed "informally", as explained in the release "Revolution 4.0 and the Man of Tomorrow". Today, informal economy and corruption both in the private and public sector appear as the main barriers to growth for Argentina and many South American countries. With banking inclusion levels similar to India, they are clearly perceived then as "third world" destinations by the business world, and yet ranking much higher in the HDI Index (as seen in the article "4 Worlds"). As mentioned, Uruguay (23rd) and Chile (27th) appear as role models for the region in the Corruption Perception Index (Argentina: 85th, Colombia 99th and Brazil 105th; just to name a few).
Harvard economist Keneth Rogoff suggests abolishing U$D 100, U$D 50 and U$D 20 bills: "There's a lot more cash out there than we really need for the legal economy. A big chunk of the cash that the US, the Eurozone, Japan, other advanced countries have printed is floating around in the world underground economy. It's facilitating drug trafficking, human trafficking, extortion, money laundering. It also plays a role in illegal immigration. My recommendation is not to get rid of cash. It is not to go to a cashless world. It's to get rid of the big bills, which don't have an important use in normal transactions. And I propose doing this very slowly over a long period".
Revolution 4.0, the digital economy, means a unique opportunity for developing nations to achieve high level of developments in an exponential rate never seen before. In that sense, the FinTechs appears as the true revolutionaries of the financial sector. Will the population take consciousness of the damage that trasactioning in "black" has towards the economy? Will the consumers willingly choose to go digital, leaving paper operations behind in an attempt to hinder tax evasion and transition towards a transparent economy? The changes will take place but will take time; the SOCIETIES that have the vision to pull through will highly be benefited in a world of digital economies.

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