More Latin Americans join digital banking services

BOGOTA, Colombia – Sonia Fierro has spent her entire adult life selling children’s books on the streets of Colombia’s capital, making wages that barely bear her living expenses, let alone the monthly fees that come with a bank account Huh.

When the epidemic left cash shortages, it qualified for government assistance, but needed an account where money could be sent. With the help of her tech-savvy daughter, she signed up for a virtual banking app called DaviPlata, which allows users to receive money, receive cash and make payments.

He said, “It’s the best thing they could do because it’s easy and it doesn’t cost anything.”

Across Latin America, the COVID-19 crisis has gained a rare bright spot: millions of people like Fierro who were long out of traditional banking have joined the financial system using digital banking services. Governments tapped into services to help emergency, and the result is a significant reduction in the number of people who rely solely on cash.

World Bank financial inclusion specialist Mahesh Uttamchandani said, “Accumulating money, saving money and paying with money is really a really important part of getting out of poverty because it makes you more resilient to economic shaking.”

Fourteen countries in the region have used virtual finance tools to distribute epidemic aid by taking a cue from Africa, which has long used similar options, better than the Cash Alliance, of governments and international organizations. A coalition to help digital banking options reduce poverty.

In Colombia, at least 1.6 million people who do not have a bank account have joined the country’s financial network since April. Eighty percent use digital purses such as Davilata, according to Luis Alberto Rodriguez, director of the National Planning Department. Officials say 85.9% of Colombians now have some kind of account, a level the government was not expected to reach by 2022.

That is important for people like Tatiana Gomez, 35, a leukemia patient and mother of three who are taking every precaution against the virus. Before the epidemic, he did not have a bank account and would have to go to the person to pay the bills with cash. Now he uses a digital wallet to complete the transaction.

“It helps avoid being on the road,” she said.

Colombia’s success is due in large part to a robust database that quickly identifies citizens eligible for assistance, but does not have an account. The nation is also home to many virtual banking options. DaviPlata was formed in 2012 by Davivienda, the country’s third largest bank. Colombians can open an account from a smartphone and do not have to pay a monthly fee or maintain a minimum balance.

Another application, Movii, was launched 18 months ago with 300,000 users. As of August, it enrolled more than 1 million people, mostly low-income people.

“For banks, it’s annoying to trend to the poor,” said Movii co-founder Hernando Rubio. “We were built specifically for this.”

Countries in the region have spent an average of 4.1% of their GDP on tax cuts, subsidies and other financial measures to overcome the economic crisis. Nevertheless, the epidemic has had horrific effects.

According to the United Nations Economic Commission Latin America and the Caribbean, the region’s GDP will fall to 9% by the end of 2020, and the poverty level will return to figures seen 15 years ago. The region’s 140 million informal workers, or half of the labor force, will bear most of the load.

Brazil has historically seen high-level citizens sign up for banking services to access epidemic aid. Sixty crore Brazilians have benefited from payments of up to $ 217 a month. Through the country’s Federal Savings Bank, Brazilians signed on to help and were automatically given a digital savings account. Bank representatives say 97 million virtual accounts have been created, of which 40% went to people who previously had no accounts.

Certainly, not every country has seen a banking boon. Peru – where 70% of people work in the informal economy and 60% do not have an account – has struggled to spread aid. The government succeeded in engaging the private sector and had trouble identifying qualified people. As a result, many recipients had to receive their assistance in the Bank of the Nation personally. In rural areas, officers had to be assisted by car.

“We did not have a Davilapata who wanted to raise this problem,” said Lilianna Kasafrenka, an advisor with the Bank of the Nation.

Yet even with those hurdles, Peru managed to increase the number of citizens with an account from 40% pre-epidemic to 40% in August. Former President Martine Vizcarra aimed to enroll every Peruvian from 1821 to 2021. Authorities expect to open one lakh new accounts by the end of the year.

In many ways, Latin America is following the example set by sub-Saharan Africa countries such as Kenya and Uganda, which use telephone companies to provide vulnerable populations with financial services for years. Kenya alone saw a dramatic increase – from 26% to 82% over the decade for such options.

Going forward, Uttamchandani said, governments will need to invest in digital services for the commercial sector to ensure that virtual accounts are used to receive assistance.

Back in Bogota, Fierro gets 160,000 Colombian pesos or about $ 44 each month. He receives cash from an ATM with a code on his cellphone and uses it for essentials such as food.

As the nation’s economy reopens, she hopes to reunite her book-selling business and start saving in a day.

“I never closed that account,” he said. “I think that’s obvious.”

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