Advancing decent work through digital wage payments

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Ana Maria Corrêa

The session addressed the challenges and opportunities digital technologies present to financial transactions in business and payment of workers. In the opening remarks, Ms Beate Andrees (Special Representative and Director, ILO Office for the UN), highlighted that the COVID-19 pandemic pushed governments and companies towards paying increased attention to the digitalisation of wage payments. So far, more than 230 million workers still receive their payments in cash around the world. These numbers are consequence of social and financial exclusion.

The benefits of digital wage payments

The Qatari government believes that the digitisation of wages payment reflects the social inclusion of workers and is driving the economic transformation, noted H.E. Alya Ahmed bin Saif Al-Thani (Permanent Representative of the State of Qatar to the UN). In order to support the transition from cash to digital payment, Qatar has massively invested in digital infrastructure.

Mr Gil Beltran (Financial Undersecretary of the Republic of the Philippines to the United Nations) also noted that digital wage payments support social inclusion. He mentioned that the Philippines government has increasingly invested in technological capabilities to promote the transition from wage cash payments to digital ones. Beltran stressed that payments in cash have higher administrative costs and represent an obstacle to the formalisation of workers.

Digitalisation of wages is essential to financial inclusion, stressed Ms. Pia Bernadette Roman Tayag (Director, Office of the United Nations Secretary-General's Special Advocate for Inclusive Finance for Development). Currently, 1.7 billion individuals around the world still do not have a bank account, costs being among the reasons for that. In this regard, digitisation of wages not only promotes social inclusion, as well as safe funds setting, remote bill payments, and participation in the digital economy.

According to Ms Laura Mackenzie (Representative, MasterCard), digital wage payments can be highly transformative because they provide dignity, security, and employment.

Mrs Harsha Rodrigues (Chief Officer, Women’s World Banking) underlined that women are less likely to be in the financial system around the world. Digitalising their wage payment is important for supporting women’s financial inclusion. However, it is not enough to ensure their full financial inclusion. Women’s financial inclusion could be facilitated by the investment in their digital and financial capability. Rodrigues believes that tracking financial behaviour is also a key aspect to the development of inclusive digital financial solutions.

Read more about Inclusive finance.

Mr. Craig Churchill, (Chief, Social Finance Programme, International Labour Organization (ILO)) considered that the transition from cash to digital payments is one of the rare agendas fully supported by both the employers and the employees. Payments in cash present more costs for employers, as well as security risks. Ms. Sharan Burrow (General Secretary, International Trade Union Confederation (ITUC)), mentioned that the employers and employees have unequal opportunities in implementing and accessing digital solutions. According to Mr. Matthias Thorns (Deputy Secretary-General, International Organisation of Employers (IOE)) highlighted that: (1) costs related to paying workers in cash are higher, (2) digital payments make it easier to enforce regulation compliance, (3) migrant workers should be empowered to transfer payments to their countries of origin.

Main obstacles to the full implementation of digital wage payments

Churchill believes that the main obstacles to the full implementation of wage digital payments are the lack of knowledge related to actual digital solutions and the existence of environments not favourable for digital spending of the workers’ wages. In order to address some of those obstacles, the ILO has created the Global Centre on Digital Wages for Decent Work. The Centre aims at accelerating the transition, enhancing sustainable enterprises, promoting respect of workers’ rights, and broadening financial inclusion.

The importance of literacy, access and trust were highlighted by Burrow, who noted that citizens must be educated in order to have full access to digital financial solutions, and that trust must be built upon dispute settling mechanisms. Thorns also noted access to technology as an obstacle in digitisation of wage payments, as well as access to bank accounts, extra fees for processing digital income, and cultural resistance.

Ms. Marjo Chaintreau (Head of Private Sector Digital Payment Innovation, Better Than Cash Alliance) noted that drivers of financial digital transformation include: diversity of digital payment solutions, creation of a right ecosystem that allows individuals to spend their money digitally, and efficient settling mechanisms.

Mackenzie believes that digital training is necessary for the transition from cash to digital payments.

Regulations and digital literacy still represent bottlenecks to digitisation of wage payments, stressed Mr Rishi Raithatha (Representative, GSMA). So far, governmental responses to the COVID-19 have been important drivers of growth. The pandemic impact prompted the governments to be more flexible in their approaches.