I remember when being an economics student we were told that there were two basic flows: the real flow (that of goods and services) and the monetary or nominal flow (that of money). It made sense that the goods were produced (real flow) and then paid (money flow). Up to here everything is correct.
More recently we have read news about the price of bitcoin that apparently is Petro, the new Venezuelan crypto-currency. A little closer, Portugal limited cash payments to € 3,000.
Is the “cash” over?
It may never end physical money, but the reality is that eCommerce is going to more and electronic payments do not stop growing.
Some might think that the digitalization of transactions could speed up the economy by reducing cycle times, lower intermediation costs, reduce fraud and even favor those less in need. Too good to be true? Let’s see the case of Africa.
Emigration and digital money
According to the UN and the World Bank, there are 600 billion dollars a year in the world to the family members left behind. From Spain, 6.6 billion dollars are sent each year to the countries of origin of the emigrants who reside in our country.
Only 22,000 Gambians, 66,000 Senegalese and 45,000 Nigerians residing in Spain, remit more than 500 million euros a year. The average cost of sending money in the sub-Saharan corridor is 9.7%. The biggest in the whole world. That is why the World Bank has set the goal for 2020 to reduce this cost to a maximum of 4%.
These remittances represent up to 20% of GDP for some of the countries in the region. A reduction in the cost of intermediation would have a tremendous impact on the net money that arrives in the country and, therefore, in the GDP.
And how to reduce the costs of moving money in a continent with a low level of banking? Surely there are alternatives, but in any case they must all pass through the digitization of money .
Mobile money in poor countries
Perhaps everything has already been written about M-pesa, the successful Vodafone initiative for Kenya and Tanzania. M-pesa is an example of GSMA is taking it to Latin America and the Caribbean area. It is confirmed that the new banks in poor areas are mobile operators.
In Senegal, shopkeepers usually charge through Orange Money. By buying a sack of rice you can transfer part of your balance of minutes to your phone number. When the merchant wants to withdraw cash, it will be enough to approach a kiosk of the mobile company and collect their money. As if it were an ATM. No banking offices, only mobile phone network. Money transferred from mobile to mobile.
Mobile money is digital money
I regret to contradict those who think that the gradual disappearance of physical money favors traditional banks. I am afraid that it is just the opposite. The more digitized, the better for citizens and the economy in general. At least, in this aspect, Africa is ahead.