The use of digital technology is on the rise and digital payments are driving global commerce. The phenomenon is not new. However, the COVID-19 pandemic accelerated digital transactions worldwide. A 2022 press release from the World Bank announced that 76% of adults now have a bank or a mobile money account – up over 10% in just over a decade.
National and international economies are adjusting to the change, but initiatives need to move faster to align with today’s reality.
Digital commerce drives economies
Two thirds of people now make or receive payments digitally. Millions of adults in developing economies made “first time” non-cash digital payments for goods or utilities sometime in the past two years. Businesses have supplemented their brick and mortar operations with ecommerce sites in droves. Public institutions are making social payments, utilities, and taxes easily payable and trackable using digital means. Investors are pouring money into digital and financial technology and payment innovations.
The benefits are clear. When payments are digital, they happen faster and can be pinpointed to exact schedules for added convenience. The extensive record-keeping around digital payments helps ensure that the right payment amounts are always made. Payment data helps budgeting and forecasting decisions, which helps conserve resources and reduce waste.
Still, many payers and payees are primarily concerned with payments that happen inside national borders. That situation does not reflect the global interconnections, global value chains and vital trade relationships that increasingly shape national economies. When news articles and global leaders mention “trade,” we know they are also talking about the data and technology that enable it. Digital innovation isn’t incidental to modern trade – it drives it.
Trade is now digital trade
Digital technology has accelerated globalization. Businesses buy from and sell to companies and customers around the globe. People are constantly on the move for work, travel, and study. They need to send and receive money to support themselves, families, and investments in other regions.
Modern trade needs to reflect that shift in the global economy to become digital trade. That shift can’t happen by itself. Global trade arrangements take time to become enacted and take shape. They make changes, they need international support, collaboration and new regulatory frameworks.
Much of that support is through digital trade initiatives. The World Economic Forum, for instance, has organized working groups and programs to move the agenda forward. An advisory committee on Payments for Trade and Commerce seeks ways to facilitate digital trade and promote policies and arrangements that support innovation in cross-border payments.
The experience of companies that build and maintain digital payment platforms are critical to these initiatives. Their technology and services are transforming local economies by bringing speed, cost savings, and efficiency to money and data flows. Strong cross-border digital trade will help them expand their capabilities further – to serve more people and organizations and fuel the modern economy.
Increased data flows between countries is building a foundation for growing trade relationships. Studies by the World Trade Organization show that increased internet adoption and growing digital connectivity led to increased participation of African countries in global value chains. Data and digital connections also reduced the cost of trade and made it more efficient.
Asia and South Asia have young populations and are rapid adopters of digital technology. Ecommerce growth and digital payments are exploding across those regions and beyond. New, digital-first businesses are emerging with the help of digital initiatives such as Google’s Go Digital ASEAN program. As companies gain a digital foothold in marketplaces around the world, digital connections are also bridging labour markets across the globe.
Digital trade relies on cross-border payments
Digital payments are an essential piece of the puzzle in making those connections run smoothly. The G20 has designated cross-border payments as a priority. It has endorsed a roadmap for enhancing cross-border payments that addresses four main challenges: cost, speed, transparency, and access.
While these are encouraging signs that digital trade is moving forward, more digital initiatives and regulatory change is needed to support new trade arrangements. Policymakers need to seek balance between protectionist trade policies and inclusive modern frameworks that support digitally-enabled efficiencies and collaborations.
Asia, ASEAN countries and Singapore, in particular, have been leaders in digital trade and payment modernization. Singapore and Thailand linked systems in 2021 to launch a real-time retail payment system. Clients can move funds in minutes between user bank accounts in either country with a mobile phone number. Exchange rates and fees are affordable and transparent.
Another way forward is through DEAs, or Digital Economy Partnerships, between two or more countries. These agreements encourage governments to update their rules to reduce friction around digital payments and innovation, information sharing, consumer safeguards and security protections. Chile, New Zealand, and Singapore signed the first DEA in 2020. In July 2022, Singapore and the UK signed a DEA that addresses digital economy issues such as the flow of digital goods, cross-border payments, and tech partnerships.
No country can afford to take a back seat on digital trade
While economies leverage new data flows and digital connections and work together to harness new digital opportunities, other regions lag behind. Some are slow to enact the necessary regulatory change. Others have adopted new protectionist policies towards the digital economy that limit data flows to specific countries or impose data localization rules. To get to the next step in digital trade, business and government leaders urgently need to address these barriers.
OTT Pay supports the free flow of information across borders. We believe it makes the global economy more vibrant, innovative, and productive. When Canadian businesses and entrepreneurs have access to data and more efficient pathways to transact international business, it supports growth. Canadian companies enter more markets, develop more partnerships, and provide better goods and services.
We recognize the important steps the Government of Canada is taking to help companies, business leaders and innovators harness this digital future. Payments modernization is a bold step forward, but we can progress faster and better together. Our advanced payment technologies support these initiatives by connecting data and trade partners and fostering trade growth nationally and internationally.
Data flows create trade opportunities
We’re excited about the new partnerships enabled by digital trade. It promises new pathways for developing countries to participate in the global economy. Removing barriers to entry will stimulate economic activity and support growth for everyone. New digital infrastructure and better data flows will lead to better business.
The digital economy will continue to transform our lives. It’s up to us to recognize and embrace the challenges and make the most of the new opportunities it brings.