Ecuador Is the World’s First Country With a Public Digital Cash System
Wednesday, August 12, 2015
The runaway success of mobile money products like M-Pesa, which first took off in Kenya, has inspired dozens of copycats around the world. Many countries in Africa, Asia, and Latin America now have services allowing people to store and transfer money using their cellphones. But there’s something different about Ecuador’s new Sistema de Dinero Electrónico. It’s being operated not by a private phone carrier or financial company, but Ecuador’s left-leaning government.
M-Pesa-like products have been hailed for bringing millions of people into the formal financial system, enabling commerce between people in different locations, and cutting theft and tax avoidance. But Diego Martinez, an economist in Ecuador’s central bank, says the government wanted its own service, because it thinks it can reduce the transaction costs that come with private offerings.
“We did it from the government because we wanted it to be a democratic product. In any other countries, it is provided by private companies, and it is expensive. There are barriers to entry, like [expensive fees] if you transfer money from one cellphone operator to another. What we have here is something everyone can use regardless of the operator they are using,” he says.
Under the program, anyone can walk into a participating bank and exchange their cash for electronic money that is stored on their phone. They can then use that to make payments to other people or to buy goods and services. For example, taxi drivers in the country’s capital, Quito, accept payments through the system.