Financial Times on the Evolution of Digital Money

Digital money: works of friction

Digitised transactions are so straightforward they may encourage overspending


Digital Money index rankings (out of 84 countries)

Black Friday matters more than a white Christmas these days. Online retail sales for this early Christmas shopping fest jumped by more than 10 per cent in both the US and UK. Widespread acceptance of digital money - payment in purely electronic form - accelerates this transformation.

Traditional stores have struggled to keep up. Walmart this week announced the departure of ecommerce guru Andy Dunn. Some countries have made faster headway on the shift to digitised transactions than others.

A Citi and Imperial College London index reveals which countries lead the way on digital money, reducing business transaction costs. Well-regulated and widely used banking systems, an independent judiciary and same-day payment systems can all lift rankings. The Nordics have led the way for years. The UK, too, sits high up the list. Contactless debit cards pay for half of all London Underground journeys. Improved and safer digital payment systems in the US make it the biggest riser on the list since 2014.

Surprisingly, China does not rank highly. Despite an enormous ecommerce sector, worth $1.9tn this year according to eMarketer, its harsh regulatory environment reduces competition. Alibaba's Alipay and Tencent control most of the digital payments market. Also, more than 200m adults there still do not have a bank account, says Citi.

Digital money is so easy to use it may encourage overspending. But there is still plenty of friction slowing its rate of global uptake.