Ecuador is the Latin American country with the greater preference for using cash in daily transactionsdespite global progress towards the digitalization of payment systems, according to a report by McKinsey Global Publishing, an American strategic consulting company.
The high rate of informal employment is one of the crucial factors explaining this trend in Ecuador. According to the report, people in the informal sector, which represents more than 50% of the workforce, receive their income in cash. In addition, limited financial inclusion remains a significant obstacle, largely due to the lack of infrastructure in rural areas and a deep-rooted distrust of the financial system.
The study Advances in Financial Inclusion in Ecuador 2023conducted by the Network of Development Financial Institutions (RFD), analyses the evolution of the financial system and its impact on the population over the last three years. Financial exclusion, according to the report, is mainly due to gaps in care in the less populated and remote provinces, where infrastructure conditions are poor. For example, People in rural areas must travel to other locations, which implies greater costs and efforts. Furthermore, it is indicated that 31% of the adult population does not have access to bank loans, more than 60% do not save due to economic and work difficulties, and only 26% of those who save do so within the financial system.
The preference for cash is not only due to economic factors, but also to a strong cultural inclination. Around the 70% of Ecuadorians associate cash management with greater control of their finances and a perception of security that they do not feel with other payment methods. The Ecuadorian case contrasts markedly with trends in other countries in the region, where the adoption of digital payment technologies is advancing rapidly.
Argentina and Chili are examples of the shift towards new payment methods. In Argentina, the growth of digital wallets has been remarkable, with applications such as Mercado Pago revolutionizing daily transactions. According to McKinsey Global Publishing, these changes are driven in part by the need to efficiently manage inflation and facilitate safer and faster transactions. In Chile, the high adoption of debit cards is largely thanks to initiatives such as BancoEstado’s CuentaRUT, which offers access to a basic bank account to all citizens, being a key pillar for financial inclusion in the country.
In Colombia and Peru, the use of digital wallets and mobile payments has also seen a considerable increase. Platforms such as Daviplata and Nequi in Colombia, as well as Yape and Plin in Peru, are making it easier for more people in low-income sectors to participate in the digital economy, McKinsey Global Publishing highlighted in its analysis.
The situation in the Dominican Republic and Guatemala shows similarities with Ecuador, where the penetration of digital payment methods remains low. The main barrier to greater adoption is the limited acceptance of these methods by merchants, a factor that discourages their use and encourages dependence on cash.
Although Ecuador maintains a strong predilection for cash, it is not isolated from regional trends that point towards greater digitalization of payments. The COVID-19 pandemic has served as a catalyst for the adoption of alternative payment methods, and although the transition has been slower compared to other countries, the opportunities to expand digital payments in the future are significant. This includes increasing the acceptance of cards and mobile payments in businesses, in addition to promoting financial education programs that help change perceptions and habits towards digital payment methods, as indicated in the consulting firm’s report.
