Its year 2025, While E-Payments have nearly replaced cash payments in some countries, people in many parts of the world continue to rely on cash for conducting their everyday transactions. Despite decades of investment, card rails still lag behind cash, mobile money, and instant account-to-account systems. Why? The answer isn’t one thing—it’s a bundle of economics, risk, infrastructure, design choices, and incentives.
High MDR is a deal-breaker for thin-margin merchants
For small retailers selling staples with single-digit gross margins, paying ~2–3% per card sale can wipe out profits. The “merchant discount rate” (MDR) includes interchange (set by the card schemes), acquirer margin, and assessments. It’s routine for credit-card MDR to land in the 2%+ range globally, and some regulators explicitly cap it around different levels.
So what? When a corner shop charges 5–8% margin on a basket, a 2–3% MDR is a non-starter, especially when cash transactions incur no such fee and various mobile money payment systems can achieve very low transaction fees. The use of cash is generally inconvenient; With mobile-money schemes buyers are faced with limited protections(dispute/refund processes).
Card networks on the other hand have to run with such MDR owing to a number of entities sharing this pie (i.e Issuing banks, Acquiring banks, card network, payment gateways).
Security risks: CNP fraud scares everyone
Card-not-present (CNP) fraud is the elephant in the e-commerce room. In mature markets with strong data, CNP accounts for the vast majority of card fraud by value—a pattern relevant to online merchants everywhere:
- In Europe, CNP made up ~84% of all card fraud in 2020–2021 (SEPA issuers). Strong Customer Authentication helped reduce levels, but the mix remains CNP-heavy. European Central Bank
- Globally, card fraud losses were $33.8B in 2023, down in rate but up in absolute dollars as card volumes grow. Nilson Report
In developing countries, where chargeback literacy is low and dispute processes can be opaque, merchants often translate “online card” to “higher risk and delayed money.” That pushes them toward cash on delivery (COD), mobile money, or instant bank rails that settle irrevocably.
The risk of CNP fraud for e-commerce transactions mean consumers are quite avoid using cards for online payments, specially on websites that may not be entirely trustworthy. Traditional card networks allow payment transactions to go through when correct card details are entered, something that can be easily stored by merchants and eventually leaked from databases. To favor convenience over security, Card networks never decided to rely on strong cryptographic signatures for online transactions, something modern smart card chips are clearly capable of. This is the core reason CNP fraud continues to thrive.
Limited P2P utility keeps cards out of the everyday economy
Cards shine for consumer-to-merchant. But the day-to-day economy in developing countries is peer-to-peer and micro-merchant to consumer: paying a corner shop, or paying a craftsman, all involve recipients that aren’t able to possess POS machines. Hence cash reigns while mobile money and instant account-to-account fund transfers continue to be an alternative.
In a very few markets, Visa Direct/Mastercard Send exist for push-to-card P2P, but hardly cost effective or widely available. Despite the risks involved with cash transactions and lack of structured dispute/refund processes for mobile money, consumers have limited card options to opt here.
Merchant–customer trust is fragile online
Where escrow, buyer protection, and verified merchant reputation systems are weak, COD dominates because people want to see the goods before paying:
- Pakistan: ~95% of e-commerce orders are paid by COD (industry reports summarized by the U.S. International Trade Administration). Trade.gov
- Bangladesh: over 90% of e-commerce users prefer COD, per e-CAB research cited by the U.S. government. Trade.gov
The bottom line is, developing countries lack highly trusted E-Commerce retailers like Amazon that conveniently offer returns, refunds and work aggressively to protect buyer interests. In the absence of retailers protecting buyers, traditional card networks lack merchant rating/escrow systems that could offer an underlying layer of protection. This has clearly held back growth of online card payments and e-commerce in general.
Heavy infrastructure reliance: POS still isn’t everywhere
Card acceptance depends on reliable POS devices, power, and data connectivity—all unevenly available:
- IMF’s Financial Access Survey (2024) shows traditional access points (branches/ATMs) have stagnated or declined in many regions, while non-traditional points (agents, mobile) surged—reflecting how cash-in/out via agents beats fixed POS in reach. IMF Data
- Nigeria’s targets (illustrative of policy ambition): a plan to lift POS density from 13.3 to 850 per 100,000 adults by 2020—highlighting just how far many markets have to go from a low base. Central Bank of Nigeria
- The World Bank and IMF both track POS terminals per 100,000 adults as a critical inclusion metric—because when POS is scarce, card acceptance simply doesn’t spread. DataBank
We clearly see lack of access to capital & infrastructure required for POS machines. Additionally card networks rarely allow offline payments. I believe that with some serious cryptographic magic, E-Cheques could be introduced, instruments that could be signed offline and then passed on to card networks eventually. Traditional card networks have made limited progress in moving toward SoftPOS and almost no progress toward offline payments.
Tax exposure: cash keeps the informal economy comfortable
A large share of commerce in developing countries is informal. Digitizing payments exposes records that can trigger taxes and compliance—so some merchants stick to cash:
- The informal economy employs ~61% of the world’s workers (about 2 billion people). International Labour Organization
- The shadow economy averages ~31.9% of GDP across 158 countries (1991–2015). IMF
When policy makes formalization painful or costly, cash stays king—and card adoption stalls. This is one area where card networks like us can barely move the needle. Regulators need to offer relaxed & reasonable tax regimes that allow conversion of this informal economy. With reasonably reduction in tax rates while enhancing the tax base, everyone – governments, banks, merchants & consumers, can win.
The Bottom line – What can be done:
I firmly believe that a radical shift in card payment technology is due, this means creation of a card payment technology that offers the following:
- Low MDRs – A framework that radically changes the MDR range, to tap into a large segment of merchants, this is achievable with lean and modern card network tech integrated into banking systems.
- Eliminate CNP Fraud – Every card transaction, whether in store or online, must be asymmetrically signed using secure element in smart cards, eliminating risk of CNP entirely as private keys held in secure elements are nearly impossible to extract/clone.
- P2P Payments – Anyone should be able to pay anyone, A card network that is built on inclusion can tap into massive segments of untapped economy, this can happen only when facilitated by robust escrow/reputation frameworks.
- Escrow & Reputation System – If a card network builds robust escrow & dispute management system to minimize scams, and a robust seller reputation system: e-commerce can grow substantially.
- SoftPOS & Offline Transactions – Merchants cannot afford expensive POS hardware, they need a dependable SoftPOS system on their phones. This accompanied with offline payments using E-Cheques can offer a highly resilient infra-lite card network.
The above explains why We embarked on creating a next gen card payment tech: seemiPay.
We would love to hear your views if there are other reasons why card payments remain a struggle in developing countries.
