Banco Central del Ecuador: Determining Electronic Payments Preferences in Ecuador

In recent years, the importance of adopting electronic means of payment for the benefit of people and the economic activity of countries has become evident worldwide. In Ecuador, credit and debit cards are the country's most widely used electronic payment instruments, especially for smaller transactions (they represent 72% of transfers). Deferred payment systems are used more for high-amount transactions (representing 73% of the total amount channeled by electronic payments during 2021).

However, it should be considered that only 64% of the population of Ecuador has a bank account (World Bank, 2022). Therefore 36% of the population does not have the option of using formal financial services or electronic means of payment and are limited to using cash for daily transactions. For this reason, efforts are being made by Ecuador’s public and private sectors to promote access and use of the financial system and the electronic means of payment in the country.

Managing Ecuador’s Transition to Electronic Payments

Despite a rise in the use of electronic payments, the Ecuadorian population remains characterized by its high demand for cash. In fact, currency in circulation (banknotes and coins) in the country represented around 28% of total liquidity in 2020 (ECB, 2021). However, the holding of cash with respect to money deposited in the financial system also increased, going from 38% to 76% between 2010 and 2020. In other words, for every dollar that exists in the financial system, there are approximately USD 0.76 of currency in the economy.

In addition to the problems inherent to the preference for cash as a means of payment, the country’s level of banking remains low, which is why coins and bills continue to be used in many economic transactions. Therefore, it is important to ...

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