BOGOTA, Colombia — Sonia Fierro has lived her entire adult life selling children's books on the streets of Colombia's capital, earning wages that barely cover her living expenses, let alone the monthly fees that come with a bank account.
When the pandemic left her short on cash, she qualified for government aid, but she needed an account where the money could be sent. With the help of her tech-savvy daughter, she signed up for a virtual banking app called DaviPlata, which allows users to receive money, retrieve cash and make payments.
"It's the best thing they could have done because it's easy and doesn't cost anything," she said.
Across Latin America, the COVID-19 crisis has yielded a rare bright spot: Millions of people like Fierro who were long excluded from traditional banking have joined the financial system using digital banking services. Governments tapped into the services to dole out emergency assistance, and the result has been a significant reduction in the number of people who rely solely on cash.
"To be able to store money, save money and pay with money is actually a really important part of being lifted out of poverty because it makes you more resilient to economic shocks," said Mahesh Uttamchandani, a financial inclusion expert at the World Bank.
Fourteen countries in the region have used virtual finance tools to distribute pandemic aid, taking a cue from Africa, which has long used similar alternatives, according to the Better than Cash Alliance, a coalition of governments and international organizations pushing for digital banking options to help reduce poverty.
In Colombia, at least 1.6 million people who never had a bank account have joined the nation's financial network since April. Eighty percent use digital wallets like DaviPlata, according to Luis Alberto Rodríguez, director of the Department of National Planning. Officials say 85.9% of Colombians now have some type of account, a level the government did not expect to reach until 2022.
That has been key for people such as Tatiana Gomez, 35, a leukemia patient and mother of three who is taking every precaution against the virus. Before the pandemic, she did not have a bank account and would have to go in person to pay bills with cash. Now she uses a digital wallet to complete transactions.
"It helps to avoid being out in the street," she said.
Colombia's success is due in large part to a robust database that quickly identified citizens who qualified for aid but did not have an account. The nation is also home to numerous virtual banking options. DaviPlata was created in 2012 by Davivienda, the country's third-largest bank. Colombians can open an account from a smartphone and do not have to pay monthly fees or carry a minimum balance.
Another application, Movii, was launched 18 months ago with 300,000 users. By August, it had more than 1 million people enrolled, mostly low-income earners.
"For banks, it's a bother to tend to the poor," Movii co-founder Hernando Rubio said. "We were created specifically for this."
Countries in the region have spent on average 4.1% of their gross domestic product on tax breaks, subsidies and other fiscal measures in an attempt to stave off an economic crisis. Still, the pandemic has had catastrophic effects.
The region's GDP will fall by 9% by the end of 2020, and poverty levels will revert to figures last seen 15 years ago, according to the United Nations Economic Commission for Latin America and the Caribbean. The region's 140 million informal workers, or half of the labor force, will bear most of the burden.
Brazil has also seen historically high levels of citizens signing up for banking services to access pandemic assistance. Sixty-seven million Brazilians have benefited from the payments of up to $217 a month. Through the nation's Federal Savings Bank, Brazilians signed up for aid and were automatically given a digital savings account. Bank representatives say 97 million virtual accounts have been created, 40% of which went to people who previously had no account.
To be sure, not every country has seen a banking boon. Peru – where 70% of people work in the informal economy and 60% do not have an account — has struggled to disperse aid. The government had limited success engaging the private sector and trouble identifying those who qualified. As a result, many recipients had to retrieve their aid at the Bank of the Nation in person. In rural areas, officials had to disperse aid by car.
"We didn't have a DaviPlata who wanted to take this problem on," said Liliana Casafranca, an adviser at the Bank of the Nation.
Yet even with those obstacles, Peru managed to increase the number of citizens with an account from 38% pre-pandemic to 40% in August. Ex-President Martín Vizcarra set a goal of enrolling every Peruvian over the age of 18 by 2021. Officials expect to open a million new accounts by the end of the year.
In many ways, Latin America is following the example set by sub-Saharan Africa countries such as Kenya and Uganda, which for years have used telephone companies to provide vulnerable populations with financial services. Kenya alone saw a dramatic rise — from 26% to 82% — over the course of a decade thanks to such options.
Going forward, Uttamchandani said, governments will need to invest in digital services for the commercial sector to ensure that virtual accounts are used for more than getting aid.
Back in Bogota, Fierro gets 160,000 Colombian pesos, or about $44, each month. She retrieves the cash from an ATM with a code generated on her cellphone and uses it for essentials like food.
As the country's economy reopens, she hopes to get her book-selling business back in the green and, one day, to start saving.
"I'm never going to close that account," she said. "I've got that clear."