Digital financial services can also help individuals manage financial risks by making it easier for them to raise money from distant friends and relatives in difficult times. In Kenya, researchers have found that mobile money users do not reduce consumption, while non-users and those with limited access to the mobile money network cut their food purchases by 7 to 10 percent.
Digital financial services can also reduce the cost of receiving payments. For example, as part of a five-month rescue program in Niger, beneficiaries were able to save an average of 20 hours of transportation and waiting time thanks to the monthly payment of government social services by mobile phone instead of cash.
Financial services can also help individuals accumulate savings and increase their purchases of necessities. After opening savings accounts, market sellers in Kenya, mostly women, saved at a faster pace and invested 60% more in their market activities. In Nepal, female-headed households spent 15% more on nutritious foods (meat and fish) and 20% more on education after opening free savings accounts. As for farmers in Malawi who deposited their income in savings accounts, they spent 13% more on farm equipment and increased their crops by 15%.
For governments, moving from cash to digital payments can help reduce corruption and improve efficiency. In India, pension fund leakage fell by 47% (2.8 percentage points) when payments were transferred by biometric smart cards rather than cash. In Niger, the distribution of social transfers by mobile phone instead of cash reduced the variable cost of benefit administration by 20%.
- Financial services can help boost development. They help people escape poverty by facilitating investments in their health, education and businesses. They also facilitate the management of financial emergencies, including the loss of jobs or crop failures that can push families into crisis.
- Many of the poor do not have financial services that offer important financial functions, such as bank accounts and digital payments. They depend on cash, which can introduce both safety and management concerns.