Digital Salaries, Real Financial Freedom?

Tim Elliott (0:00)

It's the Morning Drive, as the UAE moves rapidly towards digital payments. Lower-income workers are changing how they receive, spend and send their salaries. Edenred UAE data shows ATM withdrawals from C3Pay salary balances have fallen from 96% in 2019 to around 69% today, as cards and digital payments and online remittances have become more common. But does going digital mean greater financial empowerment? With around 77% of Edenred's card holders earning below 2,500 dirhams a month, we ask what financial inclusion really looks like for lower-income workers. Claudio Di Zanni is the managing director of Edenred Middle East. They are salary processing providers and more.

He joins me in the studio, good to meet you, good to have you here.

Claudio Di Zanni (0:57)

Good to meet you, Tim, and good morning.

Tim Elliott (0:59)

Good morning to you. How much does the shift from cash to digital payments actually change financial inclusion for lower-income workers, Claudio?

Claudio Di Zanni (1:10)

So, Tim, I think you mentioned a couple of very, very interesting words. And the two words to me are inclusion and empowerment. When we talk about financial inclusion and financial empowerment, for me and for us are two very different things. And when it comes to the shift from cash to digital, the shift actually solves for access, so solves for inclusion in a way. And that was, of course, thanks to the wage protection system that was launched a bit more than 15 years ago in the country, where actually today means that all the workers in the UAE get paid digitally through the wage protection system. And it's a great thing and it's solved for access, right?

But that's more about inclusion, that's more about inclusion, which is in a way just access, right? Then there is the financial empowerment, which to us is something very, very different and goes not one step, but probably 10 steps beyond that. Because empowerment for us is being in control of money and being able to manage your money and being able actually to face emergencies in your life. And so it's not just about getting access to that money through a digital mean, but it's much more than that. And also includes, of course, getting the right level of education, understanding how can I manage my money, and that requires much more time, it requires much more education, especially for the working population we're talking about here.

Tim Elliott (2:29)

Well, I want to talk to you about financial empowerment in a little bit more depth in a bit, and about financial education. But ATM withdrawal is falling 96% in 2019 to 69% today. What's driving that change?

Claudio Di Zanni (2:46)

So, well, first of all, if I can, actually it was even better than 69% because actually August this year we got to 65%.

And so that shift is really happening. And as you said, it went from 96 to 65, which is like a huge shift. Now, the thing to say, though, is cash is still very important for the population that we know, that we are talking about here today. And that's the population that we serve basically today. In the sense that for some workers, when they get a relatively low amount of money in their salaries, because when we, our average salary is about 16K dirhams, in a way. So it's relatively low. So when you get such a low amount of salary, in a way, it feels easier to control that amount of money in cash. You know, you get that cash in your pocket. You know, you know basically how to allocate, okay, I will spend this for food, this to send money home, and this, you know, to...

Exactly, it's something you can touch. It's that feeling. So you feel in control. And so for some workers, the most important thing when it comes to cash is again, having control of it. Then there are probably another two elements. Actually, one is very important, which is trust. And that's where cash comes into play, because for years, you know, those workers, what they did and what they still do, in a way, when they get money, when they get paid the money, when they get paid the salary, is basically queuing an exchange house to send money back home. And for them, handing over that money to a person is like, is super important, and there's a huge element of trust there. They see the face of the people they hand over the money to, to send that money back home. There is also the last point which I would like to mention, which is also what we call card acceptance. Because especially when we look at, you know, retail shops and small retail shops mainly, around the labor camps and the accommodations where those people live, some of those shops still do not accept credit cards. They accept cash. And so for them, it's about, okay, cash is important because it's the only way I can pay. And so for us, it's not about just pushing off cash. It's just saying, look, I mean, we have two different ways. And it's still important that, you know, they have basically two methods, two ways to choose from, where digital, again, of course, solves for a lot of different things, as we will talk about today.