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Digital payments have served as a key driver of expanding access to financial services to hundreds of millions globally, helping to launch businesses, create jobs, and fuel economic growth. Boosting financial inclusion has been a long-standing priority for Georgia, but gaps remain despite the country¡¯s substantial efforts. Having access to transaction accounts (from banks and other types of payment service providers) is a prerequisite for the use of digital payments. ľ¹ÏÓ°Ôº¡¯s Global Findex 2021 shows that transaction account ownership in Georgia has doubled over the past decade to reach 70.5% in 2021, and close to 62% of the adult population has sent or received digital payments. However, low levels of financial literacy and limited access to financial products, such as savings accounts, are still widespread among poorer households and micro and small merchants, especially in rural areas. Further, the  reported that access to finance remains one of the biggest obstacles for firms.

Addressing these gaps will necessitate building public trust and developing the digital payments ecosystem¡ªmaking payment systems more efficient, affordable, and ubiquitous. That will only be achieved by establishing a supportive regulatory environment and adopting new fintech technologies that serve the needs of all, including  businesses, customers, and payment system providers.

Bolstering the Regulatory Environment

ľ¹ÏÓ°Ôº, with financial support from the European Union, carried out several assessments and technical assistance activities in the context of the Georgia Financial Inclusion and Accountability Project. This included comprehensive assessments of the financial inclusion, financial consumer protection, retail payments, electronic payment acceptance, and fintech landscapes. These assessments sought to support Georgian authorities with analysis and policy recommendations to solidify the foundations for improving financial inclusion in the face of greater financial sector sophistication.

Utilizing the collected data, analysis and related technical assistance activities, the National Bank of Georgia (NBG) identified gaps and initiated several reforms to improve the regulatory environment for fintech and digital payment solutions.

NBG has made great strides at improving the policy environment and the infrastructure for digital financial services and fintech, including:

• Establishing in 2019
• Introducing a and developed in 2020
• Launching the
• Issuing in 2023
• Starting to explore and is further refining its fintech vision and exploring options to implement open finance
• Prioritizing enhancing fintech supervision in its
• Amending the Law on Payment Systems and Payment Services in alignment with the EU Payment Services Directive 2 (PSD2) also supported under the World Bank First Green and Resilient Georgia Development Policy Operation
• Applying to join the

These reforms are critical to ensuring that financial innovation in the market can be tangible for payment service providers and delivered safely for people and businesses to use. The number of fintech companies in Georgia is growing, especially firms offering payment services, and some homegrown fintech companies in Tbilisi are gaining international attention.

Moreover, consumer protection supervision has been fully incorporated into NBG¡¯s broader risk-based supervisory approach and is being further aligned with the latest developments in the EU, with respect to the regulation of consumer finance. This will encourage further adoption and increases trust and comfort from the wider public to using digital payments and services

Developing Georgia¡¯s Fintech Infrastructure

On the infrastructure front, the World Bank is working with NBG, through a Relief and Recovery for Micro, Small and Medium Enterprises (MSMEs) lending operation, to introduce a fast payment system in Georgia to enhance interoperability, achieve real-time access to funds, and bring about more affordable digital payments by creating a level playing field among the different payment service providers. These reforms have the potential to revolutionize access to and uptake of digital payments, including for cross-border remittances that are a key resource for Georgian households and the overall economy¡ªremittances accounted for 16.7% of Georgia¡¯s GDP in 2022. This project also supports the government in enhancing digital identity verification and modernizing the secured transactions framework to allow the use of movable collateral.

In April 2023, the World Bank also launched  (Frictionless Affordable Safe Timely Transactions), an initiative supported by the Bill & Melinda Gates Foundation, which  supports global knowledge, advocacy, and capacity building as well as direct technical assistance to countries in fast payments, including to Georgia.

Keeping the Momentum

Georgian authorities understand the need to strike the right balance between promoting innovation and ensuring stability, efficiency, consumer protection and integrity with regards to financial services. To this end, the World Bank has encouraged regulators to work closely with other stakeholders to monitor developments in the sector and improve providers¡¯ access to financial infrastructure, while improving market conduct supervision and introducing fair treatment and business conduct rules. Delivering on this mission requires continuous collaboration and coordination between stakeholders in the market and a greater focus on increasing the transparency and financial capability of the end users, namely individuals and MSMEs. Getting that balance right and undertaking these reforms and investments on digital payments will pay off for the people of Georgia, creating a more inclusive, resilient future.