Following the meteoric rise of Bitcoin, which recently skyrocketed in value past $11,000, it’s clear that advancements in the fintech industry are changing the monetary landscape as we know it. Whether through a cryptocurrency or other emerging technology, such as mobile money and blockchain, physical cash is being replaced by digital alternatives. From Sweden’s mobile payments network leading to only 1% of all national transactions now using cash, to the Chinese utilising QR codes for money transfers and their homeless requesting donations via digital wallets; it’s clear that we could transform into a cashless society someday.

With that in mind, it may seem surprising that the nations where the biggest and fastest changes are occurring can be found in the developing world. As mobile devices become increasingly accessible and affordable, mobile money, which lets a user pay for items by simply sending a text, has taken off dramatically. In fact, the country with the largest mobile money spend in the world during Q2 2017 was Kenya – reaching Ksh692 billion (over £5BN).

Of course, there’s no single reason for the rise of mobile money, and replacing cash is no easy feat. However, easy accessibility to cash can be a barrier to financial inclusion around the world, and many developing nations are taking steps to free themselves from its shackles. But why is this exactly? And what are the benefits that mobile money brings?

The risks of developing nations dependence on cash

Many of those living in developing nations lack access to formal financial facilities, thanks to factors such as geography or political instability. In fact, there are over two billion people that don’t have a formal bank account. In Kenya, for example, half of the population must travel for more than 30 minutes to get to the nearest bank. Without a bank account or some mechanism to deposit money, these citizens are dependent on physical cash to make financial transactions.

This is an issue for a number of reasons. Sums of loose cash are at risk of loss or theft, and without a bank account, changes to the economy impact the saver rather than the bank, and no interest can be accrued. The impact of cash dependence is also felt most heavily by developing nations, where, without access to credit, independent businesses cannot reach their full potential. As a result, it becomes very difficult for communities and families to lift themselves out of poverty.

Another unexpected effect of cash dependence is that women may have less economic participation than men. In many cash dependent societies, men are perceived as the breadwinners, meaning financial institutions give less attention to women. This makes it more challenging to enhance the financial wellbeing and inclusion of women, and even damages national GDPs, as a large percentage of a nation’s population is prevented from starting businesses or even investing.

Financial inclusion continues to improve

This is not to say that financial inclusion hasn’t been improving – between 2011 and 2014, 700 million adults gained bank accounts. Not only this, mobile money has also provided alternatives for those struggling to access physical banks or without bank accounts.

Many economies across the world are now supported, thanks to the collaborative approach of mobile money operators and fintech brands. For example, mobile money operators such as Eco Cash and M-Pesa both recognised that mobile devices are more accessible than bank branches, and are letting their users pay for education fees, groceries and utility bills, as well as make transactions to family and friends. Their service works on most mobiles, new or old, and is enhancing financial inclusion in Kenya, Tanzania and Zimbabwe.

Solutions such as these provide users with most of the benefits of a bank account, and sometimes even let them take out small loans and earn interest on savings. With mobile device ownership growing considerably beyond bank account creation, these solutions have found the perfect audience. For example, in Bangladesh only 31% of the population have a bank account, but more than 75% of the population has a mobile phone. In countries with similar situations, mobile money is giving people complete autonomy over their finances, and helping them to securely save for their futures.  

Beyond banking, from crisis recovery to GDP

Mobile money provides benefits beyond its individual users, too. National economies stand to benefit, as digital currency can be easily tracked, giving nations complete oversight of how much credit lies within their GDP. On the other hand, cash – which can be easily counterfeited – is far less transparent.

These services have already proven popular with several governments around the world, including in Afghanistan, Malawi, Pakistan, where public sector salaries and state pensions are paid this way. Even tax is harder to dodge or evade with mobile money – after only a year of accepting mobile payments, Mauritius reported a 12% increase in tax returns.

Of course, there’s more than salaries and taxes to mobile money, as it can even support economies in difficult times. During the Zimbabwe cash crisis, the country’s reliance on the US dollar meant it couldn’t print more notes when its banks ran of cash. Instead, to reduce dependence on cash, the government promoted the use of mobile money. This dramatically helped to improve the situation, and over 80% of financial transactions in Zimbabwe are now made via mobile.

With the number of mobile money users expected to hit 1 billion in 2017 alone, it should come as no surprise that these benefits are driving its growth. However, no single operator or company holds the key to overcoming financial inclusion. Only though collaboration between mobile money operators, remittance brands and fintechs can they ensure that these services are as widely available as possible, enhancing financial inclusion the world over.