PayPal research shows that Brazilians like digital money. Photo: PayPal.
Brazilians are the citizens who most like the idea of not having to use physical money compared to China, Germany and the United States (USA). In a PayPal survey, 79% gave this answer, while among the Chinese, for example, the percentage is 72%. Among North Americans, it is 58% and among Germans, 40%. The findings, PayPal says, could indicate a third wave of fintechs.
Furthermore, in all four countries citizens are “extremely” or “somewhat likely” to use a central bank digital currency (CBDC). Especially in Brazil and China and among young people aged 25 to 31, millennials. Here, this currency, which is under study, is known as the digital real. This underscores the importance “of bringing physical money-like attributes to government-issued digital money” says PayPal.
The survey “Third Wave of Fintech Innovation” interviewed 4 thousand people. According to Leonardo Sertã, PayPal’s market development leader for Latin America, “it contributed to the construction of the next pillars of the digitization of the economy and of the digital payments sector”.
“It is important to emphasize the influence of the local context. We are seeing the great excitement about the PIX. This may have positively influenced the perception of digitization, therefore, making the population more interested in a Central Bank cryptocurrency, adds Sertã.
Brazil and China prefer digital driver’s licenses
“Switching to digital payment options or even cryptocurrencies issued by a BC requires a clear demonstration of the security and benefits associated with money. This includes tax exemption, usability anywhere, the ability to better control expenses and anonymity”, concludes the executive.
In addition to the money issue, the survey showed that 57% of Brazilians and 70% of consumers in China prefer digital driver’s licenses, for example. However, 71% of respondents in the US and Germany prefer a physical driver’s license.
This finding does, however, underscore a tension with a cash-strapped future in the US and Germany, where the comfort of digital payments may apply to CBDC. But not necessarily the digital identity, says PayPal.
Despite interest in central bank coins, respondents showed mixed levels of enthusiasm for digital identity replacing physical identities. This would become a prerequisite for general use of CBDC.
However, this mismatch may be due to the population’s low understanding of what it is, how it works and what are the benefits of the digital real. Even though the population accepts a digital real because it is digital.
Cash is still the preferred method of payment
The expectation that digitization with the Covid-19 pandemic would wipe out money or reduce usage too much has not been confirmed. In fact, in Brazil, 38% make payments in cash and in other countries, the percentage is in the range of 50%. What’s more: 26% of Brazilians want to use more money in 2021. “Part of this desire could be interpreted as enthusiasm for returning to a certain normality in the post-pandemic”, says PayPal.
For face-to-face transactions, cash remains the overall preferred form of payment, although younger people use electronic payments more. The main reasons for this include, for example, not charging fees, ease of use, better control of expenses and anonymity.
“We know that the use of physical money is still a necessity, given the large portion of the population that is still being debanked. We have to keep this in mind when thinking about solutions that encourage digitization, reinforcing its simplicity and understanding”, adds Sertã.
PayPal says there may be a third wave of fintechs
According to the payments company, emerging technologies such as blockchain and machine learning will create new capabilities and financial services. So, if there is another combination of crisis – in the current case, the pandemic – with regulatory changes and new technologies, there could be a third wave of innovation in fintech.
The first was in the early 2000s, when the dot-com bubble burst, the commercial internet grew, and former US President Bill Clinton created principles for using the internet. PayPal came up there. The second was with the global financial crisis in 2008, overhaul of US financial regulation and beyond that, there was the rise of mobile internet.