M-RCBG Associate Working Paper No. 209

The Development of National Payment Systems:
Lessons Learned from Developing Country Payment Systems

Ajmal Ahmady


The development of payment systems is critical to improve financial inclusion. This paper reviews the development of payment systems across four developing countries: Afghanistan, Kenya, Brazil, and India. There are two primary conclusions that we can draw from this
research: (1) the development of payment systems is country-specific and dependent on a number of factors, and (2) there is no technology constraint to achieving 100% financial inclusion in developing economies. I conclude by providing a framework to understand the
factors that drive development of payment systems and another framework to significantly increase financial inclusion.

To begin, we review Afghanistan’s central bank (DAB) payment systems. Under very challenging circumstances, DAB was able to implement automated clearing house (ACH) and real-time gross settlement (RTGS) systems that allowed for electronic interbank payments to begin in December 2020. Furthermore, DAB was able to integrate its central switch with all telecom operators by June 2021 to allow for mobile payments between mobile wallets, as well as between mobile wallets and bank accounts.

DAB was also able to obtain the verbal agreement from all mobile network operators (MNOs) in August 2021 to create a mobile wallet for every citizen of Afghanistan, which would have allowed financial inclusion to increase from approximately 12% to 100%. Unfortunately, the Taliban takeover halted progress on these programs.

In addition to the case study of DAB’s payment systems, this paper also reviews case studies from other three other countries - including Kenya’s M-PESA program, Brazil’s PIX, and India’s UPI program. We then recommend a framework that may be of use to policymakers from developing countries that seek to accelerate the development of their own domestic payment systems. The recommended three-part framework consists of developing the proper technology stack, regulatory stack, and corporate governance structure. Finally, we provide a broader framework to increase financial inclusion more generally.

Download the paper in PDF format