Cash Is No Longer King in Latin America
Digital and noncash payments are booming in a region known for poor financial inclusion. Governments and regulators should push this wave to make access to financial services more equitable.
Warren Buffett is betting on Latin America dropping cash.
Photographer: Alejandro Cegarra/Bloomberg
Many of Latin America’s big problems, from crime to inequality, seem entrenched to the point of intractability. But here’s one area where you can find good news: On the key issue of informality and financial inclusion, the region is making giant leaps forward.
The preference for cash in the region — typically a reflection of its shadow economy — is quickly declining thanks to growing digital payment alternatives. At the same time, the number of new financial startups has mushroomed, as more entrepreneurs and traditional players vie in a red-hot market. Authorities and regulators should promote this positive trend: It’s an opportunity to include the unbanked population, making financial products more available to formal and informal workers and enabling small businesses to expand operations at less cost. At the same time, it helps to reduce the region’s infamous bureaucracy and to spur much-needed productivity increases through technology.