What are the most effective payment systems for emerging markets?

1 Cash-based systems

Cash is still the dominant form of payment in many emerging markets, especially for low-income and rural populations. Cash-based systems are simple, familiar, and widely accepted, but they also have several drawbacks, such as high transaction costs, security risks, and limited access to financial services. To overcome these challenges, some cash-based systems have introduced innovations, such as mobile money agents, who act as intermediaries between cash users and digital platforms, or cash-on-delivery services, which allow online shoppers to pay for their orders when they receive them.

3 Mobile-based systems

Mobile-based systems are payment systems that use mobile phones, either feature phones or smartphones, to initiate and execute transactions. Mobile-based systems are one of the most popular and effective payment systems for emerging markets, as they leverage the high penetration and usage of mobile phones in these regions. Mobile-based systems offer several advantages, such as convenience, accessibility, affordability, and interoperability, as they allow users to send and receive money, pay bills, buy goods and services, and access financial products, without the need for a bank account or a card. However, mobile-based systems also face some challenges, such as regulatory uncertainty, fraud and cyberattacks, and customer education and trust.

4 Blockchain-based systems

Blockchain-based systems are payment systems that use distributed ledger technology, such as Bitcoin or Ethereum, to enable peer-to-peer transactions without intermediaries. Blockchain-based systems are innovative, transparent, and decentralized, but they also pose some difficulties for emerging markets, such as scalability, volatility, and complexity. Blockchain-based systems can potentially reduce transaction costs, increase financial inclusion, and facilitate cross-border payments, but they also require a high level of technical knowledge, digital literacy, and internet access, which may not be available or widespread in some emerging markets. Additionally, blockchain-based systems may face legal and regulatory barriers, as some governments may view them as a threat to their sovereignty or monetary policy.

5 Hybrid systems

Hybrid systems are payment systems that combine elements of different payment systems, such as cash, card, mobile, and blockchain, to offer more flexibility, convenience, and choice to the users. Hybrid systems are adaptable, inclusive, and competitive, but they also require a high level of coordination, integration, and standardization among the different payment systems and stakeholders. Hybrid systems can cater to the diverse and evolving needs and preferences of the consumers and businesses in emerging markets, but they also need to ensure interoperability, security, and compliance across the different payment systems and platforms.