Why Adoption of e-Money will Grow Globally – IMF Paper



Cash and bank deposits face tough competition from, and could even be surpassed by, e-money provided by the likes of Alipay, Wechatpay and Facebook, say a new International Monetary Fund (IMF) paper.

With Facebook’s Libra project dominating the news, the IMF Fintech Note on the rise of digital money explores how traditional forms of money are being challenged by new digital forms and what implications this has for banks and regulators.

“Cash and bank deposits will battle with e-money, electronically stored monetary value denominated in, and pegged to, a common unit of account such as the euro, dollar, or renminbi, or a basket thereof,” the authors, Tobias Adrians and Tommaso Mancini-Griffdi predicted.

Adoption of the e-money and its attractiveness as a means of payment will depend largely on country circumstances and the technological advancements adopted by the banks to improve the convenience of b-money, the paper tagger “Fintech Notes: The Rise of Digital Money” explained.

In China and Kenya, for instance, the question is moot; e-money already rules. Ninety percent of Kenyans over age 14 pay with M-Pesa, and the value its transactions in China, such as with WeChat Pay and Alipay, surpass those worldwide of Visa and MasterCard combined.

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The adoption of e-money may also grow rapidly elsewhere for one or several of at least six reasons:


E-money is better integrated into our digital lives relative to b-money or central bank money. It is typically issued by companies that fundamentally understand user-centred design and integration with social media.


Cross-border transfers of e-money would be faster and cheaper than of cash and bank deposits. However, various other hurdles might emerge, such as requiring that market makers in foreign countries be ready to provide redemption in local currency. To limit the scope of this paper, we do not explore further the rich and important topic of cross-border payments using digital currencies.


If assets like stocks and bonds were moved to the blockchain, blockchain-based forms would allow seamless payment of automated transactions (so-called delivery versus payment, assuming blockchain were designed to be interoperable), thereby potentially realizing substantial efficiency gains from avoiding manual back-office tasks.

More generally, e-money functionality more naturally lends itself to being extended by an active developer community, which may draw on open-source codes as opposed to proprietary technologies underpinning b-money. Developers could, for instance, allows users to determine the goods that e-money could purchase, a useful feature for remittances or philanthropic donations.

 Transaction costs

Transfers in e-money are nearly costless and immediate and thus are often more attractive than card payments or bank-to-bank transfers especially across borders. As a result, people might even agree to sell their car for an e-money payment as the funds would immediately show up in their account, without any settlement lag and corresponding risks.


In some countries where e-money is taking off, users trust telecommunications and social media companies more than banks.

 Network effects

If merchants and peers also use e-money, its value to prospective users is all the greater. And as new users join, the value to all participants—existing and perspective, grows.