From Cash to Digital Commerce: Telecoms and Yemen’s Economic Recovery

Part 4 of the Bridge Connect Insight series: Yemen’s Digital Reconstruction

Executive summary

Rebuilding Yemen’s telecommunications networks will not, by itself, rebuild the economy.

Connectivity becomes economically transformative when people can use it to receive income, send remittances, pay businesses, access public services, build financial histories and participate in formal commerce.

That is why digital payments should be treated as a central part of Yemen’s telecommunications and economic reconstruction—not as a secondary financial-services project.

Yemen remains heavily dependent on cash, informal financial networks and money-transfer businesses. These mechanisms have helped the economy continue functioning through conflict, institutional division, currency instability and the weakening of the formal banking system. They cannot simply be removed or displaced.

However, dependence on cash also imposes substantial costs:

• Money is expensive and risky to transport.

• Payments can be delayed or lost.

• Businesses struggle to transact beyond their immediate location.

• Humanitarian and government payments are difficult to verify.

• Households receiving remittances may face high fees and poor exchange rates.

• Small enterprises have limited access to formal credit.

• Women, rural communities and displaced people can be excluded from financial services.

• Economic activity remains difficult to measure and tax fairly.

Mobile connectivity can help reduce these frictions. But Yemen should not assume that creating more electronic wallets will automatically create an inclusive digital economy.

The essential requirement is an interoperable financial infrastructure through which banks, wallet providers, money-transfer companies, mobile operators, merchants and public institutions can exchange payments securely.

Encouragingly, work in this direction has begun. In June 2025, the World Bank approved US$30 million for the Yemen Financial Market Infrastructure and Inclusion Project. The programme is intended to support a Fast Payment System, a Real-Time Gross Settlement system, stronger anti-money-laundering compliance and expanded digital financial access points in underserved areas. It is being implemented by UNDP, with the Aden-based Central Bank of Yemen as the principal beneficiary.

This is important foundational work. But technology alone will not resolve Yemen’s divided monetary authority, fragmented regulation, limited public trust or shortage of accessible cash-in and cash-out points.

A national digital-commerce strategy should therefore be built around six priorities:

1. Interoperability between payment providers

2. Accessible and proportionate customer identification

3. A commercially sustainable national agent network

4. Integration of remittances into regulated digital channels

5. Digitisation of high-volume government and humanitarian payments

6. Strong consumer protection, cybersecurity and operational resilience

The objective should not be a cashless Yemen. Cash will remain essential for years.

The more realistic goal is a cash-light economy in which digital payments provide a trusted, affordable and widely accepted alternative—and in which people can move between cash and digital value without excessive cost or restriction.

Cash has kept Yemen’s economy functioning

In a stable economy, heavy dependence on cash is often interpreted as financial underdevelopment.

In Yemen, it is also a survival mechanism.

Cash works without electricity, mobile coverage, formal identification or a functioning connection between banks. It can be accepted by a small merchant, moved through informal networks and used across areas governed by different authorities.

Money-transfer companies and informal financial arrangements have helped bridge some of the gaps created by a weakened banking system. They have also supported domestic transfers, trade, humanitarian activity and the receipt of money from Yemenis abroad.

These arrangements should not be dismissed as temporary irregularities. They represent accumulated trust, local knowledge, distribution networks and operating practices developed under extremely difficult conditions.

Any digital transition that attempts to bypass them is likely to fail.

But the strengths of cash are accompanied by serious limitations.

Cash-based transactions are difficult to verify and reconcile. They create security and transport costs.

Large sums may need to travel through checkpoints and contested areas. Recipients can be required to journey significant distances to collect payments. Physical currency can be scarce or damaged, while different banknotes and exchange rates may be treated differently across the country.

Cash also limits the distance over which small businesses can transact. A merchant who can accept only physical currency is largely restricted to customers who can reach the shop. Suppliers may require cash in advance. Records are often informal, making it difficult to demonstrate turnover or qualify for credit.

Digital payments cannot eliminate Yemen’s political and monetary fragmentation. They can, however, reduce some of the economic friction it creates.

Yemen is not one payments market

The institutional problem described in Part 1 of this series is particularly acute in financial services.

Yemen has competing monetary authorities, different regulatory instructions and banking institutions whose ability to operate can depend on their location and relationships. Currency values and rules may differ across territories. Banks and money-transfer businesses can face restrictions on dealing with institutions based in other areas.

In 2024, the United Nations warned that escalating action against Sana’a-based banks and potential exclusion from the international SWIFT system could have severe consequences for financial transactions and humanitarian activity.

This fragmentation creates a fundamental design challenge.

A technically national payments platform may be unable to function nationally if participants in one area cannot legally or operationally transact with those in another. A digital wallet issued under one authority may not be recognised elsewhere. Funds may be represented in the same nominal currency but carry different effective values.

Digital payments can therefore reproduce fragmentation rather than overcome it.

Yemen should distinguish between three levels of integration:

Technical interoperability

Payment providers can exchange messages and instructions using compatible systems and standards.

Financial interoperability

Transactions can be cleared and settled, with each provider confident that the money it receives is valid and available.

Institutional interoperability

Authorities recognise the participating institutions, rules, customer protections and settlement arrangements.

The first can be achieved relatively quickly. The second is more difficult. The third may depend on a wider political and monetary accommodation.

A sensible reconstruction strategy should make progress at each level without pretending that the existence of a new payments switch resolves every underlying dispute.

The first requirement is interoperability

Yemen does not necessarily need one national wallet.

It needs a system through which customers of different banks and wallets can pay one another.

A market composed of several closed payment platforms produces only limited value. A customer may be able to transfer money to someone using the same service but not to a person using another wallet or bank. Merchants must maintain several accounts, while agents need separate liquidity arrangements for each provider.

This fragments the network effect on which digital payments depend.

A national interoperability framework should eventually allow:

• Wallet-to-wallet transfers

• Wallet-to-bank transfers

• Bank-to-wallet transfers

• Bank-to-bank instant payments

• Person-to-merchant payments

• Government-to-person payments

• Business-to-business payments

• Bill payments

• Domestic remittance transfers

• International remittance receipt

The planned Fast Payment System is an important element of this architecture. The associated Real-Time Gross Settlement system would strengthen the infrastructure through which higher-value obligations between financial institutions are settled.

The World Bank project also recognises that infrastructure must be accompanied by stronger compliance, institutional capability and access points. This matters because an instant-payment platform has limited value if most people cannot open an account, deposit cash, withdraw funds or find a merchant willing to accept digital payment.

Interoperability rules should be transparent and non-discriminatory. Participation should not be controlled by one commercial provider capable of disadvantaging competitors.

Transaction fees should also be structured carefully. A system that is expensive for small payments will not displace cash for everyday use.

Mobile operators: essential enablers, but not necessarily banks

Mobile operators have several advantages in the digital-finance market:

• Established brands

• Large customer bases

• Distribution networks

• Billing relationships

• SIM registration data

• Retail outlets

• Network and device information

• The ability to deliver services using smartphones, USSD or SMS

In many markets, these capabilities have enabled mobile money to reach people excluded from conventional banking.

However, Yemen should not assume that mobile operators must own the entire financial-services proposition.

Operators could play several different roles:

Wallet provider

An operator or affiliated company issues electronic money and manages the customer relationship.

Distribution partner

Operator retail outlets and airtime dealers act as payment agents.

Connectivity provider

The operator supplies secure network access to banks, wallets and agents.

Identity and authentication provider

With appropriate safeguards and consent, the operator supports customer verification through SIM and network-based capabilities.

Platform partner

Operators expose secure technical interfaces that allow approved financial-service providers to use messaging, authentication and payment functions.

The appropriate model depends on regulation, ownership, competition and institutional trust.

A telecom-controlled wallet can scale rapidly, but it may also create concerns about market dominance, customer-data use and discrimination against competing providers. A bank-led system may offer stronger financial controls but lack the operator’s reach and retail distribution.

Yemen should encourage cooperation between banks, mobile operators, fintech providers and money-transfer companies rather than assume that one sector must displace the others.

The agent network is the real last mile

Digital money must connect to the physical economy.

Until salaries, merchant payments and supply chains are extensively digitised, most users will still need to convert cash into electronic value and electronic value back into cash.

This makes agents central to adoption.

Agents can include:

• Money-transfer businesses

• Mobile-phone retailers

• Banks and microfinance institutions

• Post offices

• Pharmacies

• Fuel stations

• Grocery stores

• Agricultural cooperatives

• Community businesses

• Dedicated payment outlets

Yemen already has wallet and money-transfer providers with significant agent networks. For example, Cash Wallet states that it operates through approximately 1,500 service agents, while other bank-affiliated wallets provide transfers and payment services through mobile accounts.

Headline agent numbers, however, do not reveal whether agents are active, liquid and trusted.

An agent may display a provider’s branding but be unable to process a withdrawal because it lacks cash. Another may have cash but insufficient electronic balance to accept a deposit. Some agents may add unofficial charges, apply poor exchange rates or require customers to travel back later.

A credible agent strategy therefore requires:

• Geographic coverage targets

• Agent selection and due diligence

• Adequate working capital

• Cash and electronic liquidity management

• Transparent commissions

• Reliable network connectivity

• Transaction receipts

• Customer complaint mechanisms

• Fraud monitoring

• Agent training

• Women-accessible service points

• Support for people with limited literacy

• Contingency procedures during outages

The strength of the agent network—not the sophistication of the mobile application—will determine whether many Yemenis trust and use digital payments.

Remittances should become a gateway to digital inclusion

Money sent home by Yemenis abroad is economically critical.

The precise value is difficult to determine because significant flows may pass through informal channels and official data are incomplete. World Bank data nevertheless demonstrate Yemen’s historical dependence on remittances, while the Bank notes more generally that fragile states tend to be especially reliant on these flows.

Remittances are not merely household support. They finance:

• Food

• Housing

• Healthcare

• Education

• Debt repayment

• Small businesses

• Agricultural inputs

• Emergency expenditure

But the journey from sender to recipient can involve multiple intermediaries, charges and exchange-rate conversions. Regulatory restrictions and banking fragmentation add further cost and uncertainty.

Digital remittance receipt could allow money to arrive directly in a regulated wallet or account. Recipients could then:

• Withdraw through an agent

• Pay a merchant

• Transfer money to relatives

• Pay bills

• Save part of the amount

• Build a financial transaction history

This would turn an international transfer into an entry point for wider financial participation.

However, the service must offer a genuine advantage over informal alternatives. It must be:

• Predictable

• Competitively priced

• Fast

• Widely accessible

• Transparent about exchange rates

• Usable across different networks

• Supported by adequate agent liquidity

Excessively restrictive compliance can divert remittances back into informal channels. Weak compliance, on the other hand, threatens access to international financial partners.

The answer is risk-based supervision, better identity processes and traceable transactions—not simply maximum restriction.

Digital identity without excluding the undocumented

Financial institutions need to know who their customers are. This protects the system against fraud, money laundering, terrorist financing, sanctions breaches and identity theft.

But conventional customer-verification requirements can exclude people who lack complete or current documents.

Conflict may leave individuals without accessible records. Documents can be lost, damaged or issued by institutions whose authority is disputed. Women, displaced people and rural residents may face particular barriers.

A rigid requirement for one form of national documentation could consequently exclude the people who would benefit most from digital financial services.

Yemen should consider a tiered approach to customer due diligence.

Basic account

A low-value wallet with transaction and balance limits, opened using proportionate identification.

Standard account

Higher limits and broader services supported by stronger identity verification.

Enhanced account

Full financial services for businesses and higher-value customers, requiring more comprehensive checks.

This approach matches the strength of verification to the financial risk.

SIM registration can contribute to identity checks, but it should not be treated as conclusive. A SIM may be shared, registered in another person’s name or supported by incomplete data. Mobile-network information should be one input within a broader verification process.

Over time, trusted digital identity and civil-registration systems could improve access. But Yemen should not make a comprehensive national digital identity programme a prerequisite for basic wallet use.

Start with high-volume payment flows

Digital-payment adoption is difficult if every customer and merchant must be persuaded individually.

A faster approach is to digitise major recurring payment streams that create immediate utility for large numbers of users.

Potential anchor flows include:

• Public-sector salaries

• Pensions

• Humanitarian cash assistance

• Social-protection payments

• Supplier payments

• Utility and telecommunications bills

• School and university fees

• Healthcare payments

• Taxes and licence fees

• Agricultural purchases

• International remittances

Government-to-person and humanitarian payments can create millions of reasons to open and maintain accounts. They can also reduce the administrative cost and leakage associated with cash distribution.

But poor implementation can transfer risk to recipients.

A beneficiary should not be required to pay high withdrawal fees, travel long distances or accept an unfavourable exchange rate to access essential support. Nor should one provider receive an enduring monopoly simply because it won an initial disbursement contract.

Large payment programmes should therefore require:

• Interoperable accounts

• Multiple cash-out options

• Published customer charges

• Minimum agent-coverage standards

• Service-level requirements

• Protection of beneficiary data

• Independent reconciliation

• Reliable complaint handling

• Contingency plans for network outages

• Regular competition or open participation

The goal is to use major payment flows to build shared financial infrastructure—not a series of closed programme-specific wallets.

Merchant acceptance creates the digital economy

People will retain value digitally only if they can use it.

If a salary or remittance enters a wallet but must immediately be withdrawn as cash, the system has digitised the delivery channel but not the economy.

Merchant acceptance is therefore the crucial next step.

The strongest early merchant categories are likely to include:

• Food retailers

• Pharmacies

• Fuel stations

• Telecom dealers

• Transport providers

• Wholesalers

• Clinics

• Schools

• Utilities

• Agricultural suppliers

Payment acceptance does not always require expensive terminals. Options can include:

• QR codes

• USSD

• Smartphone applications

• Payment links

• Simple merchant identifiers

• Feature-phone menus

• Near-field communication where suitable

The method should reflect customer devices, connectivity and commercial value.

Merchants will not adopt digital payments merely because government or providers encourage them. They need a business case.

Possible benefits include:

• Reduced cash handling

• Lower theft risk

• Faster supplier payments

• Remote sales

• Transaction records

• Access to credit

• Improved stock management

• Easier tax and licence payments

Against this, merchants will consider transaction fees, settlement delays, tax visibility, equipment costs and the risk that customers prefer cash.

Provider pricing must therefore recognise that small merchants operate on narrow margins. A fee structure acceptable for a large urban retailer may be uneconomic for a village shop.

Digital records can unlock small-business finance

Many Yemeni businesses are commercially active but financially invisible.

They may lack audited accounts, formal payroll records, registered assets or a conventional credit history. This restricts their ability to borrow even when they generate dependable cash flow.

Digital transactions can create alternative evidence of business activity:

• Sales volume

• Payment frequency

• Supplier relationships

• Airtime purchases

• Bill-payment history

• Seasonal cash flow

• Customer retention

With consent and appropriate safeguards, this data can support credit assessment for merchants and small businesses.

But alternative credit scoring also creates risks. An opaque algorithm may deny credit unfairly, misuse personal data or encourage unaffordable borrowing. Customers need to know when their data is being used and have a route to challenge significant errors.

Digital credit should be introduced cautiously, with limits, transparency and responsible-lending requirements.

The immediate opportunity is not unrestricted app-based lending. It is using verified commercial activity to extend appropriately designed working-capital finance to viable small enterprises.

Women must be designed into the system

Digital finance can give women greater privacy and control over money, particularly where travel to a bank or agent is difficult.

It can also deepen exclusion if women have less access to:

• Mobile phones

• Smartphones

• SIMs registered in their own names

• Formal identification

• Digital literacy

• Agent locations

• Household financial decision-making

A strategy that assumes every adult owns and controls a personal smartphone will overlook a substantial group of potential users.

Inclusive design should provide:

• Feature-phone access

• Simple Arabic-language interfaces

• Assisted onboarding

• Clear voice or visual guidance

• Appropriate privacy protections

• Female agents where possible

• Safe and accessible service locations

• Low-value accounts with proportionate identification

• Transparent charges

• Protection against coercive account access

Women’s inclusion should be measured through active use rather than the number of accounts nominally registered.

Trust is more important than technology

A customer will not hold money digitally unless they believe it will still be available tomorrow.

Trust can be destroyed by:

• Failed transactions

• Delayed reversals

• Hidden charges

• Agent fraud

• Account freezes

• Lost PINs without recovery

• Unclear exchange rates

• Provider insolvency

• Political interference

• Data misuse

• Cyberattack

• Inability to withdraw cash

Consumer funds should be protected and separated appropriately from the operating finances of payment providers. Providers need clear rules covering safeguarding, reconciliation, business continuity and insolvency.

Customers also need simple redress.

A complaints system should work through several channels—agents, call centres, mobile menus and local offices. It must produce reference numbers, defined response times and escalation routes.

Protection should extend to customer data. Transaction histories can reveal location, relationships, income and behaviour. In a politically divided and insecure environment, misuse of that data could cause serious harm.

Payment systems should collect and retain only necessary information, restrict employee access and apply clear rules to disclosure.

Design for weak connectivity and power

Digital payments must continue functioning in the environment that Yemen actually has.

Applications designed on the assumption of continuous broadband and modern smartphones will exclude many users and fail during network disruption.

Services should therefore support, where appropriate:

• USSD

• SMS notification

• Low-bandwidth applications

• Feature phones

• Delayed confirmation

• Resilient agent devices

• Multiple network connections

• Secure offline or store-and-forward functions for defined use cases

• Backup power at critical payment facilities

• Geographically separated systems

• Disaster-recovery arrangements

Offline payment capabilities create additional fraud and reconciliation risks and should not be applied indiscriminately. But continuity mechanisms are important for essential payments and areas with intermittent coverage.

Banks, payment platforms and mobile operators should test joint failure scenarios, including:

• Loss of one mobile network

• National internet disruption

• Failure of an international connection

• Data-centre outage

• Electricity failure

• Cyberattack

• Agent-liquidity shortage

• Sudden surge in payment demand

The payment system is part of Yemen’s critical national infrastructure. It should be engineered and governed accordingly.

A phased route to digital commerce

Phase 1: build trust and foundations

The first priorities should be:

• Implement the Fast Payment System and RTGS programme

• Establish participation and interoperability rules

• Map banks, wallets, agents and money-transfer providers

• Protect customer funds

• Introduce proportionate customer-verification tiers

• Establish common transaction and security standards

• Improve complaint and reversal procedures

• Identify high-volume anchor payments

• Measure the true cost and reach of existing services

This phase creates the basic architecture.

Phase 2: create everyday utility

The next stage should:

• Connect wallets and bank accounts

• Expand and professionalise agent networks

• Digitise selected salaries and assistance payments

• Integrate domestic transfers

• Encourage merchant acceptance

• Enable bill and fee payments

• Improve feature-phone access

• Develop cross-provider fraud monitoring

• Introduce transparent service comparisons

The success measure is not registered accounts but regular use.

Phase 3: connect Yemen to wider commerce

As confidence grows, Yemen can:

• Integrate more international remittance channels

• Expand business-to-business payments

• Support e-commerce

• Use transaction data for responsible SME finance

• Digitise additional public revenues and procurement

• Connect logistics and trade platforms

• Develop open, secure interfaces for financial innovation

This is where digital payments begin to support broader economic reconstruction.

What should be avoided

A government-mandated cashless economy

Cash will remain necessary. Forcing rapid withdrawal from cash would exclude vulnerable users and reduce trust.

Multiple closed wallets

Competing providers are useful; isolated payment systems are not. Competition should occur over service, distribution and price within an interoperable market.

A monopoly awarded through government payments

Public disbursements should not make one provider permanently dominant.

Regulation that excludes non-bank capability

Banks are essential to settlement and financial integrity, but mobile operators, fintech providers and transfer businesses may have stronger distribution and technology.

Weak customer-fund protection

Digital-money balances must not become unsecured funding for poorly governed providers.

Overcomplicated identification

Controls must manage financial crime without excluding most of the population.

Smartphone-only design

Feature phones, shared-device realities and low-bandwidth access will remain important.

Immediate expansion into uncontrolled digital credit

Payments should establish trust before providers use customer data to promote high-cost borrowing.

The boardroom and policy questions

Senior decision-makers should ask:

• What problem is each proposed wallet or platform solving?

• Can customers transfer value between providers?

• How will transactions be cleared and settled?

• Which aspects can operate nationally despite divided monetary authority?

• Are customer funds genuinely protected?

• Can people join without conventional bank accounts?

• How will displaced and undocumented people be served?

• Do women own and control the phones and accounts registered to them?

• Are agent numbers active, liquid and geographically useful?

• Can customers see the full fee and exchange rate before confirming?

• What happens when a transaction fails?

• How will international remittances reach domestic wallets?

• Which government or humanitarian payments should be digitised first?

• Can merchants afford to accept digital payments?

• Will payment services continue during network and power outages?

• Who can access customer transaction data?

• How will fraud and cyber incidents be coordinated across providers?

• Which investments require public support, and which should be commercially financed?

These questions should be answered before digital-payment adoption is pursued through targets or mandates.

Conclusion: digitise economic participation, not merely cash

Yemen’s digital economy will not be created by launching another wallet.

It will emerge when people can receive money, use it across different networks, pay local merchants, move between cash and digital value at predictable cost, and trust that their funds and information are protected.

Mobile networks provide the reach. Banks provide financial accounts, settlement and safeguards. Money-transfer companies and agents provide local liquidity and trust. Fintech providers can improve the user experience and introduce new services. Government and humanitarian payments can create the transaction volumes that help the market reach scale.

These elements must operate as one ecosystem.

The immediate goal should not be to eliminate cash. It should be to create a sufficiently useful and trusted digital alternative that people choose not to convert every electronic payment into physical currency immediately.

If Yemen succeeds, the benefits will extend beyond payment convenience.

Digital financial infrastructure can reduce remittance friction, support small businesses, improve the transparency of public expenditure, expand access to services and create a platform for e-commerce and investment. It can help citizens participate in economic life despite distance, limited bank infrastructure and damaged transport links.

But the transition must be inclusive, interoperable and resilient. A closed wallet used by a small urban minority is not digital reconstruction. Nor is a government payment system that leaves recipients dependent on one illiquid agent.

The measure of progress should be whether an ordinary Yemeni household or small business can move and use money more safely, affordably and reliably than before.

That is how connectivity becomes commerce—and how telecommunications begin to contribute directly to national economic recovery.

How Bridge Connect can help: Bridge Connect can assist governments, financial institutions, telecom operators, investors and development partners in designing the commercial and infrastructure environment for Yemen’s digital economy. This could include digital-payments ecosystem mapping, operator and fintech strategy, interoperability and distribution models, remittance-channel analysis, market-entry assessment, agent-network design, partnership development and board-level evaluation of the investment and execution risks associated with digital financial services.

Next in the series: Connecting the Last Mile—A New Model for Rural Yemen.