Post-COVID Recovery: Re-Writing the New Normal
Digital payments proved their worth when the pandemic left cash unviable. As the economy rebounds, there will be an opportunity to make its infrastructure more resilient.
Dare Okoudjou, Founder and CEO of MFS Africa, looks at the fallout of the COVID-19 pandemic and how the world economy can become more adaptable in its wake.
The relentless spread of COVID-19 throughout 2020 has underlined the importance of financial resilience in disasters and unforeseen events. The United Nations Sustainable Development Goals Report 2020 estimated that some 71 million people would be pushed back into extreme poverty in 2020 due to the pandemic, while some 1.6 billion precarious workers in the informal economy – half the global workforce – may be significantly affected.
But while the aggregate reporting may be global, the rapid advance of COVID-19 across the world has also highlighted how economic interconnectedness means that the worst would hit everyone at the same time. Often where one region or country was subject to severe restrictions on movement or activity, another was more open. People have therefore felt the effects of the pandemic at different paces and to different degrees according to where they are in the world. This dynamic provided a path to greater resilience – we can offset economic damage to a badly affected area by funnelling support from one that is doing better. But it depended on the availability of convenient and low-cost solutions that could reach the poorest where they were.
With incomes squeezed and jobs lost due to COVID-19, it has become increasingly important for this group to be able to easily access support from family back home, and likewise to be able to provide this support to family where needed. Remittances can be a lifeline for people in precarious situations and provide flexibility in the face of disaster by enabling money to easily move to where it’s most needed.
Remittances are more than a lifeline
The virus halted all movement of people and cash. As regions put in place different states of lockdown and movement restrictions to curb the spread of COVID-19 – this prevented customers from accessing cash. The virus also rendered cash a less hygienic option, thus states also restricted the opportunities to make in-person transactions. All of this made mobile money infrastructure more important.
The relentless spread of COVID-19 throughout 2020 has underlined the importance of financial resilience in disasters and unforeseen events.
Since remittance payments account for a significant portion of sub-Saharan Africa’s GDP (2.8% in 2019), it was vital to ensure they could be made easily to send money. The pandemic led many African countries to strengthen their mobile money ecosystems and address specific constraints. For example, Ethiopia relaxed its rules for mobile banking and money transfers – opening the market to all local businesses to encourage people to go cashless and control the spread of coronavirus. The Central Bank of Kenya raised its transition limits and Safaricom has lowered their fees, all in an effort to encourage people to ditch cash during the COVID-19 pandemic. These are only a few examples of how the financial services regulators in Africa adapted their thinking to put the safety of citizens at the heart of its operations, whilst also ensuring they have access to the wider global economy. In a few short weeks, a pandemic helped shift perspectives on the role of appropriate regulation in building financial solutions that strengthen consumer resilience.
Digital payments and financial resilience
The pandemic has emphasised the urgency and importance of these digital ecosystems to governments and decision-makers. With restrictions on physical contact and movement during an economic crisis, it has underlined the importance of being able to move money about seamlessly and highlighted the role that digital technology can play when it comes to keeping consumers and businesses connected during a crisis. Just because we have (physically) come to a standstill, doesn’t mean that the economy has to as well.
Although we are continuing record-breaking new cases, there is a silver lining. Recent announcements on successful vaccination trials are signalling the beginning of the end for this pandemic. What is important now is that we don’t retract the positive steps made to support vulnerable senders and recipients of remittances. Unfortunately, we are starting to see some reversals. In my country, Benin, revisions in regulation of cross-border payments have stripped away proportionality in payments, meaning that very small payments are being treated on the same regulatory terms as larger payments.
Africa provides an intriguing vision for what digitally-enabled resilience looks like – and the barriers that stand in its way. The continent is a leader in mobile money, with over 400 million registered mobile money accounts; the technological tools to support its widespread adoption have been in place for over a decade.
Mobile payments provide a fantastic example of how digital technologies can help us build a more resilient and adaptable world, one that can better see through crises and pandemics and mitigate the economic and social damage of these rare but impactful events. Policymakers, regulators, and businesspeople need to recognise the opportunity: to build a new normal, where digital infrastructure such as mobile payments future-proof our world.