Azernews.Az

By Leman Mammadova

Digitalization is an important component of the dynamics of the global economy’s development. The full transition to non-cash settlements contributes to the growth of financial inclusiveness.

Azerbaijan has a great potential to fully transfer to digital payments, said Majeed Hujair, the senior director of Visa School of Public Policy.

"Mobile usage in Azerbaijan is very high. The government and the banking sector need to think cleverly how to expand payments through mobile," Hujair said.

He stressed that the government’s role in helping to shift to digital payments is great and crucial.

"The government needs to enable the receiving of digital payments in all the departments and public entities and also encourage people to avoid cash payments," the expert noted.

He stressed that sometimes the governments need to revise their regulations and make the regulations easy for participants.

According to the state program on the expansion of digital payments in 2018-2020, the annual volume of non-cash payments in Azerbaijan will reach about 17 billion manats by 2021.

Implementation of the program will allow to increase the share of non-cash payments by seven percent annually.

According to the program, the share of cash payments in transactions carried out in the country's economy will fall from 74 percent to 40 percent.

As noted in the state program, the creation of a more favorable environment involves not only prohibiting regulation, but also the use of special incentive mechanisms.

It is also mentioned that for the development of financial markets it is necessary to increase the activity of the banking sector, increase competition within the sector, create an active money market, improve the bank's risk assessment, take measures to offer cheap and high-quality banking services to entrepreneurs and the public.

Movement towards a “non-cash economy” is officially one of the priorities of financial regulators in a number of countries, both developed and developing.

The development of a cashless environment is something for which financiers and the state are fighting for understandable reasons. The velocity of circulation of cash is lower than that of electronic ones, the cash flow is less transparent, and therefore more adapted to the shadow economy. In addition, cash is subject to high risks of impairment from inflation and other economic fluctuations.

According to international studies, there are three types of effects from an increase in the share of non-cash money in the economy:

Transparency - a group of effects associated with better accounting of monetary transactions, increasing tax collection, reducing the share of the shadow economy, reducing the operating costs of various businesses, etc.

Sustainability - systems with a high proportion of non-cash payments, according to a number of studies, are more resistant to fluctuations in the economic environment in the phases of recession.

Growth - A number of studies indicate the direct effect of increasing the share of non-cash payments on overall economic growth through increasing the speed of transactions and increasing their number by reducing the cost of each transaction.

Volume of non-cash payments through Azerbaijan’s national payment system reached 274 billion manats ($161.22 billion) in 2018, which is 32 percent more compared to the figures from the previous year.

The share of cash payments made up 52 percent, which is 8 percentage points less than the figure for 2017.

International experts believe that the full use of non-cash settlements in Baku will lead to an increase of $1.9 billion in revenues, including business income – by $1.4 billion, government’s revenues – by $400 million, consumers’ income – by $100 million.

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Leman Mammadova is AzerNews’ staff journalist, follow her on Twitter: @leman_888

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