An official website of the United States government

Why Digital Payments Matter for Markets and Matter for You
May 28, 2019

Photo from the panel discussion “Making Digital Payments Work for Market Development”


In a panel discussion called “Making Digital Payments Work for Market Development: A Conversation with the U.S. Payments Industry,” hosted by the U.S. Department of State’s Bureau of Economic and Business Affairs, leading practitioners from across the financial services field discussed the challenges of relying on cash transactions, the benefits of digital payments in emerging markets, and the importance of partnerships in fostering economic growth.

The Limits of a Cash-Only System

Compared to digital payment systems, cash economies are limited, with less access to credit and fewer opportunities for growth. This translates to valuable data lost in a cash-based system, data that could be used to drive market growth.

For business owners, cash might seem like an easier payment option, but its benefits are short lived. Indeed, small-business owners may save on taxes and, in the short term, earn more with cash, but over the long term, with a more formalized, digital system, entrepreneurs can reach new markets and better track their spending, affording them the opportunity to save for future purchases and expand their enterprise.

Financial systems that use digital technology to track and process transactions also enable transparency in systems that might not otherwise be accountable. This information empowers citizens and civil society to see what businesses and public servants are doing with public funds, among other things. The benefits of transparency and accountability that digital payments make possible make these tools worthwhile over the long term.

Digital Payments, Credit Scores, and Loans

In practical terms, when payments are digitized, they are accounted for and banks can see how business owners are spending and saving their money. For instance, every time a business owner completes a transaction using a digital payment method, the amount spent or received is automatically tracked by his or her bank. And if the individual is making a purchase with a credit card, the time taken to pay off that debt affects his or her credit score, with those paying off their bills on time scored highest. With this information available, entrepreneurs are better able to build up their respective scores and eventually apply for loans and other funding.

With digital payments, too, transactions and payments are fully documented, which enables banks and other local institutions to include businesses more fully in the community. When businesses are fully integrated into their community, they have better access to credit and other business support services. And when businesses are integrated into their community, they are able to participate in supporting business-friendly laws and advocating for a level playing field for all entrepreneurs.

Final Thoughts for Entrepreneurs

For entrepreneurs, digital finance tools hold additional promise for optimizing efficiency. Using digital payments instead of cash transactions effectively streamlines paying employees and partners, giving business owners more time to create the best products and services for their customers.

As Manisha Singh, acting under secretary for economic growth, energy, and environment at the U.S. Department of State, explained, “Payments are the rails on which economies move.”

For business owners, adopting digital payment tools, encouraging customers to use them, and working with partners who can help in reaching new markets is key to ensuring that transaction data is available, business owners can build up their credit, and individuals can gain funding for new ventures.

By moving to a formal system and implementing digital payments across markets, both businesses and consumers can benefit from a more transparent, efficient system. And for entrepreneurs, this means better access to the resources they need to reach and serve new markets.

Interested in raising funds for your small business? Take our Fundraising Concepts and Fundamentals of Grant Writing courses today and learn how you can get the funding you need to get your business off the ground.