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ISSN 2067-3310, E-ISSN 2067-7669 

Vol. 17, No. 2 (2023), pp. 181-186 

 

181 
 

THE IMPACT OF DIGITAL PAYMENTS ON THE GROWTH OF 

CASHLESS PAYMENTS AND THE FACTORS LIMITING ACCESS TO 

FINANCIAL SERVICES 

 

Zakir Zeynalov   

Azerbaijan State University of Economics (UNEC), Azerbaijan  

ORCID ID 0000-0001-8110-3025, E-mail: zakir_zeynalov@unec.edu.az 

 

Abstract. Most countries worldwide are undergoing digitalization, with the adoption of 

non-cash payment methods accelerating. In recent years, the population and economic entities 

in our country have readily embraced the use of digital technologies. Organizing new methods 

of innovation is a key priority in the pursuit of strengthening the financial stability of the 

banking system. The introduction of new technologies serves as an effective tool for improving 

production potential, providing financial support, and stimulating entrepreneurship. Ensuring 

the reliability and security of the payment system, enhancing the efficiency and speed of 

payment operations, expanding financial inclusion by providing the population with access to 

payment services, minimizing the volume of cash circulation, and organizing and promoting 

new methods of innovation in the payment market. The application of financial technologies, 

especially in payment services, enables market participants to conduct their payments 

conveniently, safely, and at low cost. It allows for a broader involvement of economic cycles in 

the banking sector, limits the informal economy, and increases banks' credit resources and 

financial intermediation. 

Keywords: banking sector, digital payment, financial services, financial intermediation, 

payment cards. 

 

INTRODUCTION 

In recent years, a number of serious steps have been taken in Azerbaijan in the direction 

of maintaining macroeconomic stability, forming a favorable business environment and 

developing non-oil sectors, and reforms have been continued.  Strategic roadmaps for the 

national economy and the main sectors of the economy, many state programs have been 

adopted, economic development goals for the near, medium and long-term perspective have 

been defined.  Building a digital economy takes an important place among these goals.  The 

development of the digital economy will lead to wider involvement of economic cycles in the 

banking sector and will multiply the investment and lending opportunities of the sector, and 

provide access to sources of financing.  Renewal of production capacity, increase of fixed 

capital, finding new forms and mechanisms of investment attraction for modernization of 

production, will stimulate growth of economic activity and investment opportunities.  The deep 

reforms initiated in the economy have created a favorable opportunity for the formation of a 

new development model and the achievement of sustainable economic growth.  In such 

circumstances, ensuring the transition from the “capital accumulation” based model to the 

“effective” based growth model (Azerbaijani Government, 2016) is considered the most 

important strategic challenge of the new era. 

          The historical services of the Great Leader Heydar Aliyev, who has independent 

organization, management skills and phenomenal analytical thinking, are invaluable.  The 

mailto:zakir_zeynalov@unec.edu.az


THE IMPACT OF DIGITAL PAYMENTS ON THE GROWTH OF CASHLESS PAYMENTS 

AND THE FACTORS LIMITING ACCESS TO FINANCIAL SERVICES 

 

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National Economic Development Strategy, which was founded by Heydar Aliyev, is 

successfully continued by Ilham Aliyev.  The follower of H. Aliyev’s policy, political heir, 

courageous and heroic statesman, President of the Republic of Azerbaijan Commander-in-Chief 

Ilham Aliyev played an unparalleled role in the formation and establishment of the Oil Strategy. 

In the last 20 years, the strategic goals set by the President of the country, Ilham Aliyev, have 

been achieved.  During this period, the economy of Azerbaijan increased by 4 times, the non-

oil sector by 2.8 times, and the non-oil export by 4.1 times.  Strategic currency reserves 

exceeded 65 billion dollars as of 01.06.2023. The main purpose of the Digital Payment System 

is to ensure continuity of the payment service. Most countries of the world are moving towards 

digitalization, the use of non-cash payment methods is spreading faster.  The changes in the 

digital payment system, the availability of non-cash payments in the payment system to the 

financial services of the population and enterprises, increase the relevance in the financial 

sector.  The COVID-19 pandemic has spurred the adoption of digital payments internationally. 

In recent years, the population and economic entities in our country have readily embraced the 

use of digital technologies. Electronic money is considered safer and more convenient than 

physical currency, facilitating quick and efficient financial transactions. This approach aims to 

minimize the risks associated with banking transactions, ensuring the reliability of the payment 

system and the security of non-cash payment instruments. Additionally, it seeks to enhance the 

efficiency and speed of payment transactions by reducing associated costs, promoting financial 

inclusion by ensuring widespread access to payment services, and fostering innovation in the 

payment market within the digital economy. 

The establishment of a digital economy holds a significant role in fortifying the financial 

stability of the banking system. The application of digital technologies in payment services 

enables market participants to conduct their payments securely and conveniently. This, in turn, 

contributes to broader involvement in economic cycles within the banking sector, restricts 

informal economic activities, and augments banks' credit resources and financial 

intermediation. In Azerbaijan, several legislative acts have been enacted in recent years to 

expand non-cash payments and enhance transparency in the economy. The implementation of 

new laws in this direction creates fresh opportunities. Key objectives include expanding the 

non-cash payment environment among the population and business entities, as well as state 

structures, while simultaneously minimizing the volume of cash circulation. 

Overall, these initiatives underscore the commitment to embracing digital 

advancements, fostering financial stability, and driving economic growth through a more 

efficient and transparent payment ecosystem. The application and expansion of digital payment 

technology will lead to a reduction in cash-related costs, a systematic provision of the tax base, 

as well as access to financial services for market subjects, an increase in investment and credit 

opportunities for the banking sector in general, and ultimately economic growth. 

Within the framework of the State Program, the range and volume of electronic banking 

operations will expand, the proportion of the population using electronic banking will increase, 

and the growth of the volume of electronic commerce will accelerate the de-cashing of the 

economy. This will significantly contribute to the increase of budget revenues and the standard 

of living of the population. It should be noted that banking services are the central link in the 

financial system and reflect the processes taking place in the economy as a whole, including in 



Zakir ZEYNALOV 

183 
 

individual areas, in providing the material and technical base of reproduction. The limitation of 

banking services restricts the participation of legal and natural persons in the reproduction 

process, as a result of which the chain of transmission of the product produced in the real sector 

to the final consumer loses its effectiveness. 

 

RESEARCH METHODOLOGY 

Creating a stable system in the banking services market and strengthening its integration 

into the real sector are considered among the main challenges facing the economy of 

Azerbaijan. One of the critical factors for ensuring the development of the non-oil sector in 

Azerbaijan is the availability of investment sources. This, in turn, necessitates efficient 

operations in the banking sector. A key indicator of the successful functioning of the banking 

sector is the level of access to financial sources among the population. Thus, increasing 

financial inclusiveness among the population and lending substantial amounts of funds 

circulating in the economy to the real sector are directly possible as a result of the effective 

functioning of the banking sector. 

The rapid adoption of modern technologies in financial payment services creates 

conditions for market participants to make their payments comfortably and safely, enabling a 

broader involvement of economic cycles in the banking sector and an increase in banks’ credit 

facilities. Limited access to financial resources – on one hand, causes the banking sector to be 

deprived of sufficient funds circulating in the economy, and on the other hand, does not allow 

the revitalization of the non-oil sector. The size of the amount of cash in circulation limits not 

only the country’s economy but also the financial intermediation of the banking sector to a large 

extent. In the last 15 years, special importance has been given to the intensive use of the 

possibilities of the National Payment System (NPS) among businesses and the population. In 

2022, the total volume of payments made through the Real-time Interbank Settlement System 

(AZIPS) and the Small Payments Settlement Clearing System (ХОХКС), which are the main 

components of the system, reached 341.9 billion Manat (2.6 times of GDP). The number of 

payments in 2022 was 97.2 million, representing an increase of 37% in the number and 57% in 

the volume of bank transfers compared to 2021. 

In AZIPS, the total volume in 2022 was 300.1 billion Manat, with 1358.6 thousand 

payment documents processed, amounting to AZN. Compared to the previous year, the volume 

of operations increased by 63.3% (116.3 billion manats), and the number increased by 22% 

(245.6 thousand units). The average amount of each payment document processed by the 

system was 220.9 thousand manats. In XOHKS, an important component of the payment 

system, 95,896 thousand payment documents with a total volume of 41.9 billion manats were 

processed. Compared to the previous year, the number of transactions increased by 37.7% 

(26,257.6 thousand pieces), and the volume of transactions was 8.0 billion manats. There was 

an increase, and the average amount of each processed payment document was 437.3 manats. 

 

DISCUSSION 

 In recent years, one of the modern payment trends, the Instant Payment System (IOS) 

and the blockchain-based Digital Identification System have been created, the card 

infrastructure has been improved, and the possibilities of non-cash payments have been 

increased.  For the first time in the country, “smart student cards” with payment functionality 



THE IMPACT OF DIGITAL PAYMENTS ON THE GROWTH OF CASHLESS PAYMENTS 

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have been issued to students in the education system. The implementation of this mechanism 

allows to expand of infrastructure capabilities and offers innovative payments to customers.  As 

a result of the convenience and safety of non-cash payments, the radical change in the financial 

behavior of the population, the emergence and application of modern innovative payment 

channels, realizes the possibility of rapid growth in the dynamics of digital payments. 

 337.3 thousand payment documents with a total volume of 549.6 million manats were 

processed in the Instant Payment System (ISP) launched on 01.01.2023.  Compared to 2021, 

the number of operations has increased by 2.9 times (220.3 thousand units).  In the total volume 

of payment documents processed in the payment system for 2022, AZIPS had a special weight 

of 87.6%, XÖHKS 12.2%, and AÖS 0.2% 

 

Figure 1. Components of the National Payment System in %

 
Source: Prepared by the author based on Central Bank Statistics 

 

As a result of the work done in the direction of the development of cashless payments, 

the pace of development during 2022 was higher than in previous years.  As of 01.01.2023, the 

number of payment cards in circulation is 13.6 million.  Units, the number of ATMs was 3 

thousand, and the number of POS-terminals was 79.8 thousand.  During the reporting period, 

the volume of non-cash transactions with payment cards within the country increased by 2.1 

times to 24.4 billion.  Formed manat.  The number of e-commerce transactions in the country 

has increased by 2.4 times and its volume by 2.5 times compared to 2021.  The specific weight 

of non-cash payments made with payment cards in the country increased by 11.4 percentage 

points compared to last year and was equal to 43.2%.  During the reporting period, the volume 

of transactions carried out through internet banking services increased by 50% compared to 

2021, and the volume of mobile banking transactions increased by 3 times. (CBAR, 2022) 

  One of the main problems of the banking sector is the lack of alternative financial 

institutions in order to eliminate the limitation of financial inclusion among the population.  In 

the world experience, the creation of alternative financial institutions to traditional banks is 

encouraged to involve the population in the financial-banking system and, in parallel, to 

diversify the banking sector and the economy.  Although such organizations differ according to 

the characteristics of the countries, they are essentially the same and aim to include large 

amounts of money flows outside the banking sector into the general financial system of the 

country and provide cheaper loans to the real sector by providing access to financial services 

for the population (Zeynalov, 2021). The intensity of access to financial services has a positive 

effect on the demand for banking services and economic activity along with the improvement 

of the population’s well-being. 



Zakir ZEYNALOV 

185 
 

Figure 2. Cash flow (M0/M2) 

 
Source: Central Bank Monetary Policy Review 2023 January – June 

 

The specific weight of cash money (M0) in manat broad money (M2) was 46.3% by the 

end of the period (CBAR, 2023). Due to the convenience and speed of non-cash payments, 

radical changes have taken place in the socio-economic landscape of cash in several countries.  

With the advent of mobile phones and innovative payment channels, the dynamics of 

digital payments are rapidly increasing. According to the 2020 edition of the World Payments 

Report (World Payments Report 2020), "over the last year, the volume of non-cash payments 

made via the Internet increased by 14.1%, and the volume of payments made by mobile phone 

increased by 8.1%. At the same time, in 2020, although the size of the world economy shrank 

due to the COVID-19 pandemic, the volume of cashless payments made through electronic 

commerce increased significantly. Thus, a 62.4% increase in the volume of credit card 

transactions and a 52.7% increase in debit card transactions were observed in electronic 

commerce" (CBAR, 2023). 

The low level of financial literacy among the population and lack of knowledge about 

the advantages of digital payments have a negative impact on the use of these services. A study 

conducted by the World Bank shows that "interest in opening bank accounts in Azerbaijan is 

significantly less. Financial literacy is lower in regions and rural areas, especially among 

housewives and elderly population groups" (CBAR, 2023). The weak competitive environment 

and low level of financial literacy in the digital payment system, high cash circulation outside 

banks (M0/M2=46.3%), and the rapid expansion trend of the monetary base (2 times in the last 

5 years) are factors limiting the development of cashless payments and access to financial 

services. (Zeynalov, 2021).  

At the same time, the weak development of financial markets, the high cost of digital 

payments, poor use of payment facilities by business entities and population groups, and a 

number of other factors significantly impact the volume of digital payments. Cyberattacks and 

money laundering also pose serious risks when using electronic money. It is crucial to 

continuously implement various projects aimed at increasing access to cheap and convenient 

financial services for the population and businesses in the country and increasing the volume 

of non-cash payments. For the diversification of the banking sector and the economy, the 

creation of alternative financial institutions to traditional banks will create the possibility of 

attracting large amounts of financial flows outside the banking sector to the banking circulation 

and providing cheaper loans to the real sector by ensuring the population’s access to financial 

services. 



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CONCLUSIONS 

 In conclusion, the application of new technologies emerges as a powerful tool for 

enhancing the qualitative aspects and increasing the production potential of a nation. By 

extending innovative payment services to customers, there is a positive impact on mobilizing 

internal financial resources and reducing the high cost of credit resources within the banking 

sector. Furthermore, the improvement of economic management mechanisms, with a 

heightened focus on formulating sectoral development strategies grounded in the economic and 

labor potential of distinct regions, stands out as a priority issue. The overarching goal is to foster 

economic growth and entrepreneurship stimulation. Addressing the pressing matter of financial 

accessibility for both businesses and households is paramount. Establishing a robust connection 

between the real and banking sectors requires concerted efforts, including collaboration with 

international financial institutions such as the International Monetary Fund and the World Bank.  

Urgent monetary reforms are essential in this context. To expand financial inclusion in 

the banking services market and deepen financial intermediation, building trust in the financial 

sector and ensuring transparency are foundational. Measures to develop the capital market play 

a crucial role in this endeavor. The organization and promotion of innovative methods in the 

payment market, especially those facilitating access to non-cash payments, represent a key 

priority. This involves fostering confidence, transparency, and regulatory frameworks covering 

the legal and security aspects of digital payments to ensure the stability and security of the 

payment system. Creating a stable system in the banking services market and reinforcing its 

integration into the real sector are imperative. Diversifying investment sources becomes a 

strategic approach for the banking sector to minimize risks effectively. Lastly, the rapid, 

efficient, and secure adoption of innovative innovations in digital payments and electronic 

banking services necessitates ongoing efforts to educate the population and enhance financial 

literacy periodically. This holistic approach ensures the sustainable growth of the economy, 

supported by a well-functioning and resilient financial ecosystem. 

 

REFERENCES 

1. Central Bank of the Republic of Azerbaijan. (2022). Annual Report. Baku. 

2. Central Bank of the Republic of Azerbaijan. (2021-2023). Digital Payment Strategy. 

Retrieved from https://worldpaymentsreport.com/resources/world-payments-report-2020/ 

3. Central Bank of the Republic of Azerbaijan. (2021-2023). Digital Payment Strategy. 

Retrieved from http://documents1.worldbank.org/curated/en/880631470853969754/pdf/107748-WP-

P125462-PUBLIC-10-8-2016 AzerbaijanEnhancingFinancialCapabilityandInclusionFINAL.pdf 

4. Central Bank of the Republic of Azerbaijan. (2023). Review of Monetary Policy, January 

– June. Baku. 

5. Zeynalov, Z. (2021). Economic opportunities and factors limiting access to financial 

resources in the financial sector. In Republican Scientific Conference on "Economy of 

Azerbaijan in the Years of Independence" (p. 191). Azerbaijan State University of 

Economics. 

6. Government of Azerbaijan. (2016). National Economy and Strategic Road Map on the 

Main Areas of the Economy. Baku. 

 

https://worldpaymentsreport.com/resources/world-payments-report-2020/
http://documents1.worldbank.org/curated/en/880631470853969754/pdf/107748-WP-P125462-PUBLIC-10-8-2016%20AzerbaijanEnhancingFinancialCapabilityandInclusionFINAL.pdf
http://documents1.worldbank.org/curated/en/880631470853969754/pdf/107748-WP-P125462-PUBLIC-10-8-2016%20AzerbaijanEnhancingFinancialCapabilityandInclusionFINAL.pdf

