Governments are the biggest generators of payments globally, estimated at over US$40 trillion in 2009.1 Also according to the World Bank, only 25 percent of developing countries process their cash transactions and social benefits electronically. Yet, 90 percent of governments see the need to improve the overall efficiency of their payment systems.2
A recent study commissioned by Visa Inc. found that many governments from both developed and emerging economies are already adopting electronic payment systems. But many countries are not making the shift at the scale and pace required to achieve the full benefits of the transition.
Government-to-Person (G2P) Success Stories
- The U.S. Treasury has transitioned to electronic benefit payments across broad categories, such as food stamps and more recently, Social Security. The process has been accompanied with considerable consumer education and support. The net result is that the percentage of payments made electronically by the USG has risen to 86 percent of all payments in 2011.3 In 2013, a law goes into effect that all benefits will be paid only electronically.
- Colombia has undergone one of the most rapid transitions to electronic with Familias en Accion, which pays bimonthly amounts to 2.4 million households, or 11 percent of the population. Within two years, the program went from 76 percent of its beneficiaries being paid in cash to only 9 percent in 2011—by which time, 91 percent had a card-linked bank account.4
- The Brazilian social welfare program, Bolsa Familia, which delivers money transfers to 12.4 million recipients, was able to reduce administrative costs from 14.7 percent to 2.4 percent of the total grant value by moving to an electronic payment program.5
- Argentina has seen a decrease in government payment leakages with the Ministry of Social Development’s shift to electronic payment cards. Those who admit to paying bribes to local officials in order to access their money fell from 3.6 percent to 0.3 percent.6
- A study of the Mexican social welfare program Oportunidades that uses debit cards to disburse payments documented an increase in the number of families using banking services when they received their benefits through debit cards and a 12 percent increase on average in families’ use of grants for income-generating activities or microenterprises.
- The Pacific Financial Inclusion Programme (PFIP), under the United Nations Development Programme, is developing branchless banking infrastructure, financial literacy training and financially-inclusive bank accounts in the Pacific Islands. The G2P programs in Fiji, where 35 percent of the population live below the poverty line, are the first in the region to transition to electronic payment methods. Rather than waiting in long lines at social welfare offices, beneficiaries can access their account at all Westpac banks, 37 ATMs and 893 FTPOS merchants across Fiji.
Millions of people in developing countries worldwide receive their salaries, benefits and pensions through G2P payments. Though the coordination across government departments is challenging, the financial and strategic benefits of making government payments electronic are lasting and tangible. The Better Than Cash Alliance supports the transition by providing the policy, technical and financial assistance needed to identify and implement the most effective approach for local market conditions.
1-3 Payment Systems Worldwide, A Snapshot, Outcomes of the Global Payment Systems Survey 2008, The World Bank, Page 95
4 Bold, Porteous, Rotman (2012); Maldonaldo & Tejerina IDB Technical Note 2010
5 See “Banking the Poor via G2P Payments,” CGAP, December 2009.
6 Banking the Poor via G2P Payments, report by CGAP and DFID