Digital Payments and the Transition from a Cash-Based to a Digital Financial System in Lebanon
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Lebanon has been facing a prolonged financial and banking crisis and turned to a cash-based economy. At the same time, digital payments and financial technologies offer solutions for improved transaction efficiency, financial inclusion, traceability of payments, and increased access to formal financial services. This study aims to explore the trajectory of digital payments in Lebanon and determine whether the evidence from practice suggests a shift towards a more digital finance economy. The paper employs a comparative secondary-data design that primarily relies on World Bank Global Findex Database for Lebanon for 2021 and 2024, complemented with recent reports from International Monetary Fund (IMF), World Bank, and Banque du Liban (BDL). The study uses the percentage of adults who made or received a digital payment as a key indicator and complements it with such variables as account ownership, digital bill payments, online purchasing behavior, and reasons for cash use. The descriptive statistics indicate that the percentage of adults who made or received a digital payment has increased by 7 percentage points between 2021 (14.8%) and 2024 (21.8%). The percentage of account ownership grew slightly between the two time points (21.6% in 2021 and 23.3% in 2024). Nevertheless, the analysis reveals that cash remains deeply embedded in Lebanon's payment ecosystem. For instance, among respondents who indicated that they only use cash for in-store merchant payments, 61.5% attributed their preference to the habit factor, while 22.4% indicated that merchants only accept cash. The findings thus demonstrate that while there is a tendency for increased digital payments, the shift to a cashless economy in Lebanon has not occurred yet. Recent regulatory initiatives from BDL that target electronic money and merchant discount rates, as well as the IMF's interest in reducing Lebanon's reliance on cash, indicate that the formal institutional environment is also undergoing transformations. The paper concludes with a discussion of the implications of the findings for financial institutions, merchants, regulators, and future research.
Keywords
Cash-Based Economy, Digital Payments, Electronic Banking, Financial Inclusion, Financial System, Global Findex, Lebanon, Technology Adoption