Digital finance is a part which has not been critically addressed within the literature. There are several benefits to financial services users, digital finance providers, governments. And therefore the economy by the digital finance and financial inclusion. The main aim of the monetary services available through digital platforms is to contribute to poverty reduction. And also to contribute to the financial inclusion objectives of developing economies.
Financial technology has evolved at a quick pace over the last decade. But its benefits have reached mostly those that have the technological know-how needed for it. Those that lack experience with technology face risks of exploitation by intermediaries. And even have less faith in online banking.
Digital Wages: Fintech and Financial Inclusion
An experiment from Bangladesh conducted by Emily Breza of Harvard University shows. That giving digital wage payments to workers improves their spending behavior. And encourages them to find out banking by themselves. This effect is far lesser if workers are given bank accounts but are still paid wages in cash. Since it makes the utilization of online banking optional.
The study is predicated on a survey of over 3,100 low-wage earners, of whom 23% got payments in cash and 56% got bank or mobile wage transfers. The remainder also got the power of bank accounts, but they were still paid in cash.
The workers are from Bangladesh’s manufacturing industry. They had little or no education. They had low trust in formal banking also. But over time, those receiving wages in banks became more likely to transact and economize . The authors note that these workers were 58% more likely to transact. Without having external assistance than those that were given the facilities as an option.
As the workers began engaging in banking transactions the study finds that formal banking grew sharply. The study finds strong prevalence of learning-by-doing among inexperienced customers. And says that training and education on this front can benefit uneducated individuals the foremost . The authors also conclude that sending wages digitally has more benefits than simply opening accounts.
The study makes a robust case for financial literacy. And offers valuable insights to the banking system for expansion in low-income countries where wages are usually paid in cash.
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