Digitizing Money in Yemen

In Yemen, the implementation of an electronic rial payment system must be complemented by updated credit infrastructure, digital connection infrastructure, and financial technologies to empower e-money services. Until date, the infrastructure needed to run e-currency and e-payment systems has either been inadequate or is still being created. The RTGS, which is required for settling high-volume transactions and allowing digital interoperable payments, is still missing from the interoperable digital and financial infrastructure. Individuals and organizations are compelled to maintain several accounts and deal with different sorts of financial transactions when interoperability is lacking, resulting in inefficiencies and constraints in the usage of digital payments. ^[8]

Clients having e-money accounts at any bank that's offering mobile banking and e-wallet services have faced several challenges throughout the conflict, including the high cost and slow speed of internet services in Yemen, as well as the restricted mobile phone network coverage. Yemen has the poorest digital connection infrastructure, information and communications technology (ICT) sector, and energy provision in the Middle East and North Africa (MENA) region, all of which are necessary for the financial system and e-money service providers to function.

Yemeni mobile network operators have refused to provide unstructured supplementary service device (USSD) and integrated voice recording (IVR) services to e-payment providers because they are technologically inadequate. The USSD, an MNO-controlled communication channel, is crucial for securely delivering mobile financial services to all cell phones via encrypted SMS text messaging. If adopted, this method would result in cheaper costs than the current paradigm of providing e-money services through banks. Because there is no USSD service, it is difficult to reach illiterate and low-income people who reside in rural regions, do not possess smartphones, and are not linked to the internet. ^[9]

During the conflict, internet connectivity and electricity supply have been harmed. The damage to the undersea cable in 2020, has knocked off 80% percent of Yemen's internet capacity, making it difficult to perform commercial and financial activities across the country. When the internet service is down or the working speed is poor, the smartphone applications that handle the e-rial payment do not work. On January 21, 2022, a Saudi-led Coalition attack on a telecom building in the Red Sea city of Hudaydah cut out electricity to the country's principal internet access point, resulting in a large-scale and full internet blackout in various parts of the country for four days. ^[10]

Yemen's electrical supply, which was already poor before the war, has further deteriorated as a result of the ongoing conflict, with infrastructure strikes and fuel shortages cutting off the bulk of the country's population from grid-supplied electricity. ^[11] Financial firms that rely significantly on Yemen's internet infrastructure to deliver digital financial services would undoubtedly be harmed if the energy supply remained unstable. Through expanding and facilitating financial inclusion, improved digital financial services and electronic money might be revolutionary in addressing Yemen's humanitarian catastrophe. Given the country's present political chaos, fragmentation in monetary policy and regulation among rival central banks, and the country's poor e-payment infrastructure, broad adoption of e-money services seems to be improbable.