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How digitization is accelerating international trade
How did the pandemic facilitate cross-border trade?
It certainly helped move things along more efficiently in two ways, Nextrade Group founder and CEO Kati Suominen says during a livestream conversation on closing the global digital gap hosted by GZERO in partnership with Visa.
First, customs agencies in many countries (finally!) went paperless — a huge help for small businesses. Second, COVID accelerated the move toward logistics tech innovations like data-driven route optimization or drone delivery that make it easier and faster to deliver stuff.
Suominen hopes that governments continue the trend and that "we continue plowing forward" on digital cross-border trade.
The debilitating cost of remittances
Dilip Ratha knows how hard it is to work abroad and send money home. Why? Because he had to go through the same hoops when he was a migrant.
It's the inconvenience and the cost, the World Bank's head of KNOMAD and lead economist says during a livestream conversation on closing the global digital gap hosted by GZERO in partnership with Visa.
Still, Ratha points out, these flows are a lifeline for millions of poor families around the world. And they keep the lights on in remittance-dependent economies like El Salvador or Lebanon.
With an average 6% commission, the amount lost each year is double all the aid that the US gives to the entire world or what sub-Saharan Africa gets.
Political unrest when governments fail struggling citizens
What happens when 1.4 billion people are cut off from the global economy because they don't have a bank account at a time of mounting crises?
"The geopolitical ramifications are potentially huge," Ali Wyne, senior analyst for Global Macro-Geopolitics at Eurasia Group, says during a livestream conversation on closing the global digital gap hosted by GZERO in partnership with Visa.
First, it was COVID. Then came the twin blows of the food and energy crises, aggravated by Russia's war in Ukraine. When people are struggling, Wyne adds, they'll look to their governments for solutions.
"And if they feel that they're not getting satisfactory answers," he warns, "we can't understate the potential for significant political unrest."
Adapting to a digital economy around the world
In the next decade, 70% of new value in the global economy will come from digital businesses. But more than 3.5 billion people without internet access will be cut off, and not all of them will live in the developing world.
“This is very much a global challenge,” Eurasia Group senior analyst Ali Wyne says in a livestream conversation hosted by GZERO in partnership with Visa.
Much of the developing world went digital during the pandemic. We see this, for instance: in Nepal, where it pushed people to go cashless and women in rural areas to embrace digital banking. Yet many remain unbanked, and that means they struggle to create wealth because they only deal in cash, according to Visa's Rubén Salazar. Having no bank account also makes it harder to send remittances, as we learn from a Mexican recipient and from the World Bank's Dilip Ratha.
There is hope, though. For Nextrade's Kati Suominen, digital payments are helping small businesses around the world reach new markets. The global move toward online shopping is a huge opportunity to scale, adds PayPal's Usman Ahmed.
In short, digital adoption faces many challenges but also huge opportunities to make things better for those who have the least.
Watch our recent livestream discussion on remittances and other tools for economic empowerment.
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Lowering costs of poverty with digital & economic access
By the end of the decade, 70% of all new value in the global economy will come from digitally enabled businesses. The pandemic accelerated a push toward digitalization, especially in developing nations, yet nearly 4 billion people are still offline, and 1.4 billion don't have a bank account.
Expanding access to digital tools for individuals and small businesses is a no-brainer, but easier said than done. So, what can we do to expand digital trade further, come up with fairer and safer remittances and digital payments, and push to include everyone in tomorrow's digital-first economy?
To get some answers, GZERO hosted in partnership with Visa the livestream conversation "Closing the Gap: Digital Tools for Economic Empowerment," moderated by JJ Ramberg, co-founder of Goodpods and former host of MSNBC's Your Business.
Rubén Salazar, global head of Visa Direct, underscored how digital decency has become more acute in the post-pandemic world, yet many systems — for instance, payroll — remain analog. He also explained why unbanked people live in a vicious cycle of hardship because they can only operate in cash and lamented why cash-only networks make remittance fees so high — even as the UN goal wants to set a global 3% limit by 2030.
Ali Wyne, senior analyst for global macro-geopolitics at Eurasia Group, discussed how the discrepancy of having 1.7 billion people now cut off from the direction of travel of the global economy creates both an urgent imperative to go digital and an opportunity to narrow the gap. The likely geopolitical fallout from all of this happening after COVID and the food and energy crisis made worse by the war in Ukraine? Waves of political unrest that'll topple governments.
Dilip Ratha, head of KNOMAD and lead economist at the World Bank, shared his personal story of sending remittances to his family when he was still a student in the US. That's how he learned why it's so hard for migrants to send money back home — a lifeline for their families and remittance-dependent economies around the world.
Kati Suominen, founder and CEO of digital tech firm Nextrade Group, extolled the virtuous cycle of digital payments and access, which helps everyone the same way lack of it holds up all of us. She singled out paperless customs and logistics tech improvements as a major COVID silver lining for digital trade and offered her take on why — when they go digital — women-led small businesses often perform those led by men.
Usman Ahmed, head of global public affairs and strategic research at PayPal, offered some striking figures on what happens to small businesses when they embrace digital: sales triple by selling online, and quadruple by selling across borders. Does he see any downsides to a cashless economy? Nope, especially when it comes to the digital services created around it, but Ahmed recognized that unbanked people face tough challenges to ditch cash.
How can we get unbanked people to go digital?
Sending remittances can be prohibitively expensive. How come?
It costs a lot to manage cash in a secure way for unbanked people, Rubén Salazar, global head of Visa Direct, says during a livestream conversation on closing the global digital gap hosted by GZERO in partnership with Visa.
But some players are making progress in reducing costs, which the UN wants to cap at 3% by the end of the decade.
For Salazar, we need to tackle the problem holistically. That's why Visa has just inked a deal with Singaporean B2B payments platform Thunes to integrate digital wallets for unbanked people with Visa's digital payments network.
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Watch live October 19: Can access to digital tools transform the world's economy?
Is digitization crucial to economic growth? GZERO Media is partnering with Visa to explore what it means when 70% of the global economy’s growth in the next decade is projected to come from digitally-enabled businesses – yet 3.7 billion people lack internet access. What are the tools and initiatives needed to bring more people into the digital economy?
Live on Wednesday, October 19, our expert panel will explore the impact of digitization on empowering consumers and small businesses. Please register to attend.
Participants:
- JJ Ramberg, Co-Founder, Goodpods, and former host of MSNBC's Your Business (moderator)
- Usman Ahmed, Head of Global Public Affairs and Strategic Research at PayPal Inc.
- Dilip Ratha, Head of KNOMAD and Lead Economist at the World Bank
- Ruben Salazar, Global Head of Visa Direct
- Kati Suominen, Founder and CEO, Nextrade Group
- Ali Wyne, Senior Analyst, Global Macro-Geopolitics, Eurasia Group
Will Nepal cash out?
Like much of the world, Nepal saw digital payments soar during the pandemic.
Tulsi Rauniyar, a young Nepalese documentary photographer, experienced the transition firsthand. With COVID making human touch a big concern, e-commerce and cashless transactions became more commonplace — so much so that Rauniyar herself rarely uses cash anymore. This technological globalization is increasingly helping female entrepreneurs and businesswomen succeed in Nepal. But it still needs to reach rural areas — where many hard-working women are unaware of these transformative technologies.
Watch our recent livestream discussion on remittances and other tools for economic empowerment.
- Connecting the world: the power of digital trade - GZERO Media ›
- Why regulating cross-border digital trade is tricky - GZERO Media ›
- What We're Watching: Digital payment lifelines for cash-strapped ... ›
- The Graphic Truth: The digital payment boom - GZERO Media ›
- Adapting to a digital economy around the world - GZERO Media ›
- How digitization is accelerating international trade - GZERO Media ›