The Benefits – And Downsides – of ‘Buy Now, Pay Later’: Is it Enhancing or Hindering Financial Inclusion?
Posted: Wed Feb 12, 2025 7:57 am
Ten thousand miles away from India, in Brazil, the national government is creating regulatory frameworks to boost financial inclusion by bringing more competition to the country’s financial services market. Like many emerging markets, the top five incumbent banks in Brazil have historically controlled a large share of the market – in Brazil’s case, they account for almost 90% of all banking assets. The result? Bank fees in the country are extraordinarily high, and interest rates are amongst the highest in the world. Recognizing that this traditional model is not working, the Central Bank of Brazil decided to enable new regulations to fuel innovation and promote competition. Among the first steps they took was the deregulation of the merchant acquiring space – which consists of the financial institutions that enable retailers and other companies to accept credit card payments. This had previously been entirely controlled by just two companies, Visa and Mastercard. By breaking that system open, regulators allowed more players to emerge in this space, reducing costs dramatically, and making it possible for merchants of all sizes to accept debit and credit card payments. These measures are bearing fruit—the president of the Central Bank recently announced that concentration in the banking sector fell 10% in the past decade due to competition from new fintech entrants.
In both India and Brazil, these regulatory reforms are ongoing. The next step in India’s efforts will focus on cardless cash withdrawal. In May 2022, the Reserve Bank asked banks in India to enable the option of cardless withdrawal, so that anyone can get cash at an ATM by just inputting their UPI details for authentication. Such a move promises to improve convenience and security across India, as it can eliminate cards entirely—as well as the risks posed by card cloning and other frauds. This initiative could soon pave the way for cardless cash withdrawal among semi-urban and rural customers using the Aadhaar Enabled Payment System (which authenticates customers’ biometrics to allow merchants to accept payment from customers of any bank). Card usage is generally low among these customers, so these efforts could potentially increase financial access across the country. And India’s small and medium-sized businesses (SMBs) won’t be left behind, either: The Ministry of Micro, Small and Medium Enterprises also recently put out a draft policy outlining ways to transform brazil whatsapp number data the country’s SMBs with technology, regulatory improvements and more financing options.
Similarly, in Brazil, regulators have created a sequence of reforms across all areas of financial services. These reforms are creating new classes of payments and lending licenses to fuel innovation in credit and enable new types of digital payments, and allowing insurance providers to reinvent traditional products. And in 2020, the Central Bank of Brazil launched Pix, an instant payments network that, like UPI in India, is managed autonomously by the Central Bank, and that all financial institutions in the country are required to adopt.
Without a huge amount of buy-in from the governments of both countries, this level of adoption and innovation simply wouldn’t be possible. These successes show that progress requires not just a framework for regulatory reform, but the will and skill of local central banks to put reforms and resources into place. In other words, it’s a combination of vision and an ability to execute that makes for meaningful progress.
In both India and Brazil, these regulatory reforms are ongoing. The next step in India’s efforts will focus on cardless cash withdrawal. In May 2022, the Reserve Bank asked banks in India to enable the option of cardless withdrawal, so that anyone can get cash at an ATM by just inputting their UPI details for authentication. Such a move promises to improve convenience and security across India, as it can eliminate cards entirely—as well as the risks posed by card cloning and other frauds. This initiative could soon pave the way for cardless cash withdrawal among semi-urban and rural customers using the Aadhaar Enabled Payment System (which authenticates customers’ biometrics to allow merchants to accept payment from customers of any bank). Card usage is generally low among these customers, so these efforts could potentially increase financial access across the country. And India’s small and medium-sized businesses (SMBs) won’t be left behind, either: The Ministry of Micro, Small and Medium Enterprises also recently put out a draft policy outlining ways to transform brazil whatsapp number data the country’s SMBs with technology, regulatory improvements and more financing options.
Similarly, in Brazil, regulators have created a sequence of reforms across all areas of financial services. These reforms are creating new classes of payments and lending licenses to fuel innovation in credit and enable new types of digital payments, and allowing insurance providers to reinvent traditional products. And in 2020, the Central Bank of Brazil launched Pix, an instant payments network that, like UPI in India, is managed autonomously by the Central Bank, and that all financial institutions in the country are required to adopt.
Without a huge amount of buy-in from the governments of both countries, this level of adoption and innovation simply wouldn’t be possible. These successes show that progress requires not just a framework for regulatory reform, but the will and skill of local central banks to put reforms and resources into place. In other words, it’s a combination of vision and an ability to execute that makes for meaningful progress.