Trade and Investment

7 lessons COVID-19 taught us about improving digital payments 

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Yan Xiao
Project Lead, Digital Trade, World Economic Forum LLC
Keyzom Ngodup Massally
Head of Digital Programmes, Chief Digital Office, United Nations Development Programme (UNDP)
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This article is part of: The Davos Agenda
  • COVID-19 accelerated the rise of digital payments, increasing financial inclusion but also raising risks.
  • A group of leaders from the public and private sector outline seven ways to combat these risks.
  • These recommendations are the result of good practices from governments, humanitarian organizations and others implementing large-scale transfers during COVID-19.

COVID-19 has accelerated the digitization of the economy. As the need for social distancing grew, digital payments, which used to be nice-to-have, transformed into a daily necessity in many countries. Governments around the world introduced or expanded digital financial transfers in response to the severe damage inflicted by the COVID-19 crisis on economies and livelihoods.

Government support can help encourage the adoption of digital payments and promote financial inclusion, providing access to financial services to those who have been excluded due to low connectivity, limited access to handsets and identifications, and low literacy. For example, the World Economic Forum’s Trade Facilitation 2.0 Project in Papua New Guinea is working to advance digital payments in the country to encourage digital foreign direct investment.

Yet digital financial transfers also bring risks, elevated during the COVID-19 pandemic, which must be addressed to ensure their effectiveness and protect users.

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With this in mind, leaders from the public and private sectors, including the UN-based Better Than Cash Alliance of more 75 governments, companies and international organizations who are committed to responsible digitization of payments to advance the United Nations Sustainable Development Goals (SDGs), convened around the Bill & Melinda Gates Foundation Global Situation Room to develop a quick reference resource on global good practices for large-scale digital transfers. This resource builds on the Better Than Cash Alliance’s Responsible Digital Payments Guidelines to identify short-term and long-term actions to mitigate the risks exacerbated in COVID-19.

The group identified seven recommendations, listed in order of severity of the risk.

1. Create complaint and feedback channels

Digital financial transfer recipients sometimes experience difficulties accessing the complaints and feedback mechanism systems, or having their problems addressed.

Governments and cash transfer programs should set requirements and define responsibilities to address grievances in real-time with financial service providers. Regulators may address this risk through setting and enforcing minimum standards for complaints and feedback channels. From the service providers’ perspective, they could develop feedback and complaints channels that work for low-literacy and inexperienced users and provide services with more gender sensitivity.

Image: Yaw Niel /

2. Increase financial and digital literacy

The recipients of government benefits are usually low income with limited or no exposure to digital payments. Digital transfer programs are typically rolled out at a fast speed, which means the recipients may find it challenging to understand and access the digital tools.

Governments can partner with business and non-governmental organizations to create education campaigns targeting specific capacity challenges through popular media channels among target groups in local languages.

3. Spread information to increase inclusivity

Lack of identification, living in rural areas, limited information of eligibility criteria and enrollment information, disabilities, poor connectivity and limited agent network outreach have all contributed to excluding people from participating in digital transfer programs.

To address this particular risk, it is important for regulators to ensure that social welfare programs are inclusive and all information about such programs is made accessible by all, including the disabled. It is also crucial for governments to digitize the building blocks for enrollment. Both governments and companies can leverage open and secure technology and tools (such as mobile phones) and networks established by utility companies, telecom operators and tax registries to conduct more outreach to help people obtain identification and gain access to digital payments.

4. Learn from transaction failures

Factors that lead to transaction failures include poor connectivity, the poor performance of a payment partner’s system, or a mismatch in biometrics/identities due to the poor quality of biometrics captured at enrollment or the matching algorithm.

As a starting point, digital transfer programs should collect transaction failure rates as part of daily key performance indicators and track the reasons for failure. Such programs should also consider providing non-digital alternatives where necessary and develop contingency plans.

5. Provide details about cash-out points

Given most of the transactions among digital transfer program recipients may still require cash, it is important to provide Information on cash-in and cash-out points. There is a need for governments and private sectors to work together to come up with a common platform that maps cash-in and cash-out points across various service providers. Such a platform can also help identify locations that should be prioritized for improving outreach and also to help providers optimize liquidity levels.

6. Avoid overcharging

The operational and pricing rules for digital payments transactions (such as daily transaction limit) may create an issue of overcharging. In some markets, last-mile agents are also charging customers for fees they are not subject to.

Regulators should conduct spot checks to monitor the situation of overcharging and require customer protection clauses be integrated into agents’ contracts. Companies need to provide more clear pricing guidelines and to work with government agencies to ensure transparency and secure adequate remuneration to agents.

7. Observe social distancing

Social distancing still needs to be observed in cash-in and cash-out points to avoid the health and safety risks of overcrowding. In addition to providing clear advice and protective equipment to agents, governments and service providers can increase digital transaction limits to reduce the need for cash-out to avoid overcrowding. Governments may also remove or reduce fees for digital transactions to encourage people to keep funds digital.

Digital financial transfers will only be able to help those who most needed financial assistance when these risks are fully addressed.

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