Swedish retail giant H&M has said it plans to digitize payments along its supply chain following findings that switching to digital payments holds huge benefits for garment industry employers and employees alike.
Paying workers using mobile money, bank accounts and other forms of digital payment can save an average garment factory in Bangladesh approximately 750 hours of staff time per month and reduce monetary costs by up to 85 percent within two years, according to a new report by the Better Than Cash Alliance, a United Nations-based partnership to accelerate the transition from cash to digital payments.
H&M is the first global fashion brand to join the partnership and commit to encouraging its suppliers to pay workers digitally. The Swedish fashion house employs 1.6 million people through its supply chain, who will benefit from greater access to financial services and the ability to make and receive payments in a faster, safer and more transparent way, according to the report. The partnership’s report also states that digital payments are also less vulnerable to loss and theft and can be more accurately recorded.
Women, who make up 65 percent of the company’s supply chain workforce, also benefit from greater control over their earnings. As a result, the Alliance suggests that the transition can contribute toward the Sustainable Development Goals.
H&M’s social sustainability manager, Gustav Loven, said the fashion chain was keen to roll out digital payments along its supply chain since they offer an efficient and scalable way to improve the lives of both employees and suppliers.
“They offer a faster, safer and more transparent way to receive their salary, increase financial inclusion and support women’s economic independence,” he said. “For our suppliers, paying wages digitally can generate savings, increase security and provide more accurate data on wages.”
The Better Than Cash Alliance report, written in collaboration with the World Bank, looked at 21 garment factories in Bangladesh already using digitized payment systems. It found that those using e-payments made huge savings by no longer having to physically hand cash out to staff, a process that took workers off the production line and increased the administrative burden.
Factories also saved money on the security and transport costs associated with handling large amounts of cash, the report found.
The greatest savings were made by providing employees with “hybrid” accounts, bank accounts that can be accessed through mobile phones or ATMs, rather than one or the other, and that can be used to send and receive money, make payments and buy airtime.
However, approximately 80 percent of factories in Bangladesh still pay employees in cash.
H&M joins 55 other Better Than Cash Alliance members, including Coca-Cola, which recently made a commitment to digitize payments, especially to small retailers, and Grupo Bimbo, a Mexico-based multinational bakery product manufacturing company, which set up a platform to help small retailers access digital payments.
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About the author
Sophie Edwards
Sophie Edwards is a reporter for Devex based in London covering global development news including global education, water and sanitation, innovative financing, the environment along with other topics. She has previously worked for NGOs, the World Bank and spent a number of years as a journalist for a regional newspaper in the U.K. She has an MA from the Institute of Development Studies and a BA from Cambridge University.