eMoney within value chains, although more efficient, is clearly not a silver bullet for creating digital liquidity. Besides having limited reach, value chains by themselves do not remove the incentive to cash-out to any meaningful degree. Given these limitations, is there a role for tight value chains in creating digital liquidity? Is eMoney somehow less important to tight value chains?
One needs to look at payment-enabling these tight value chains as just one part of a holistic approach to digital liquidity – an approach that considers the lifecycle of money and introduces solutions that encourage a digital version(s). A holistic approach gives SHFs and, more broadly, the bottom of the pyramid (BoP) ample opportunity to receive, retain, and pay with eMoney. Within this construct, crop buyers, banks, governments, and urban relatives would inject eMoney into the local BoP economy because it is faster and cheaper than cash. The BoP would retain this money in electronic form until needed because doing so helps them access credit lines, manage household petty cash, and gain other benefits. When the BoP needs to make a payment, they would use eMoney for both local BoP-to-BoP transactions and payments to institutions because doing so provides access to layaway programs, lines of credit, and other benefits. Compelling eMoney use cases are the best way to drive this transition and value chains contribute to this endeavor
Even if eMoney within value chains will not materially impact digital liquidity, eMoney is still valuable. Some benefits are direct, such as lower cash handling costs. Other benefits are indirect, such as improving access to credit through transaction histories. In some cases, eMoney is part of a much larger solution with broad benefits, such as subsidy programs that improve food security. The justification for eMoney should not and does not need to rest on digital liquidity alone. What are the implications for strategists and policy makers? For those focused on driving eMoney adoption and achieving digital liquidity, it is important to remember that value chains are just one use case for furthering adoption and digital liquidity. Accordingly, strategists and policy makers should evaluate a range of use cases and evaluate how value chains fit into the roadmap.
The authors of this technical report are T. Hardy Jackson and Allen Weinberg. The reviewers and contributors are Carol Benson, Juan Buchenau, Thomas Lammer, Ajai Nair, Paul Khalil Nelson, Quang Nguyen, and Ashwini Sathnur