The government is circulating low-fee paperless currency in hopes of reducing the costs and failings of the cash economy.
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.