The Role of Digital Currency in Driving Financial Inclusion in the GCC: An Overview

Introduction: Rapid Evolution Towards Cashless Societies in the GCC

The COVID-19 pandemic has not only disrupted lives but also transformed the world’s digital landscape, leading to a surge in financial inclusion across poor and middle-income countries. According to the World Bank, during the pandemic, 40% of the people who made digital payments in the developing world were first-time users. This digital revolution has propelled the journey towards building cashless societies, and countries in the Gulf Cooperation Council (GCC) are leading the charge.

The Benefits of a Cashless Society in the GCC

For millions of people across the Middle East and North Africa (MENA) region, financial inclusion is the primary benefit of a cashless society, enabling personal independence, social mobility, and economic development. Financial inclusion allows citizens to participate in the digital economy, access fast and affordable financial services, and build scalable businesses. For governments, financial inclusion provides a platform for gross domestic product (GDP) growth, security, tax transparency, and international competitiveness.

Banks, Fintechs, and the Role of Collaboration

GCC countries are exceptionally well-placed to achieve cashless objectives, with well-educated demographics and high mobile penetration rates. Furthermore, their tech-savvy citizens are enthusiastic adopters of new digital payment solutions developed by leading banks and a network of Fintech ecosystems designed to unleash cashless solutions. The collaboration between Fintech companies and banks has the potential to create new business models that help both parties.

Central Bank Digital Currencies: The Way Forward

The development of cashless solutions relies on the provision of an enabling regulatory framework. GCC countries are on the front foot with regards to regulations, and the latest innovations relate to central bank digital currencies (CBDCs). The development of wholesale and retail CBDCs can enable the digitalisation of the entire trade finance process. CBDCs could also enable innovations such as “programmable money” and greater control over money supply by the central bank. These outcomes mirror the stability of a wider cashless society.

Conclusion: The Future of Cashless Solutions in the GCC

The journey towards a cashless society is gaining momentum in the GCC, driven by the benefits of financial inclusion. The development of an enabling regulatory framework and collaboration between banks and Fintechs are key drivers in achieving cashless objectives. Central bank digital currencies have the potential to revolutionize the payments industry, boost financial inclusion, and support economic growth. The GCC region is well-positioned to lead the way in the development of cashless solutions and create a more inclusive and resilient financial ecosystem.

The Road Ahead

Despite the GCC’s remarkable progress towards cashless societies, challenges remain, including the need to improve digital literacy, enhance cybersecurity, and address the issue of financial exclusion among vulnerable groups. Governments, banks, and Fintechs must continue to work together to address these challenges and ensure that the benefits of a cashless society are accessible to all.