Cost Savings

Electronic payments can eliminate the handling, transportation and distribution fees associated with cash-based payments and also can eliminate the risk of fraud and theft, which is a persistent challenge of both in-kind and cash distributions. Around the world, governments, the development community and the private sector make billions of dollars in cash payments to the poor, including social benefits, humanitarian aid, or payroll and supplier payments distribution. While cash is preferable to the distribution of physical goods, electronic payments are better than cash, with cost savings as one of the key benefits.

Reducing Costs

The shift from cash to electronic payments can dramatically reduce costs for governments, the development community, the private sector, and recipients. A recent report by the World Bank found that governments can save up to 75 percent with electronic payment programs.^¹

Electronic Payments Reduce Administrative Costs. Cash results in significant overhead, transaction and administrative fees, including the cost for governments, finance departments and banks to process cash.

The Brazilian social welfare program, Bolsa Familia, which delivers money transfers to 12.4 million recipients, reduced administrative costs from 14.7 percent to 2.4 percent of the total grant value by moving to an electronic payment program.^²
The South African Social Security Administration saw its administrative costs of delivering social transfers drop 62 percent after moving to bank account transfers offered by the private banking sector.^³
A study of four large cash transfer programs in middle-income countries found that social agencies could achieve cost reductions of 30-60 percent per transaction over physical cash payments, provided the infrastructure already existed to make electronic payments.^⁴

Electronic Payments and Cost Savings

Electronic Payments Reduce Security Costs and Loss of Funds from Theft. Cash must be protected from fraud, theft and corruption, which requires a high level of security.

According to a recent McKinsey report, it is estimated that 75-80 percent of the $22 billion in benefits of shifting India’s government payments to electronic would come from reducing leakage of funds in government transfer schemes ending up in the wrong hands.^⁵
A Mercy Corps study comparing the use of mobile money and physical cash distribution after the 2010 earthquake in Haiti found that incidents of theft of cash transfers fell by more than 50 percent, due to the use of mobile money.^⁶

Reducing Costs by Saving Time. Those who receive cash-based payments must deal with long lines and if there are any payment mistakes or errors, the process can take even longer. Recipients often travel far, incurring transportation and accommodation costs to receive payments, which also results in a separation from family and the source of income.

In Niger, 10,000 households in 96 different communities were randomly assigned to receive a monthly cash transfer over five months either in cash directly or in a mobile wallet. Those paid into the mobile wallet experienced time savings alone worth the equivalent of a day’s grain to feed a family of five; and researchers found evidence that they followed better financial practices compared to those paid in cash.^⁷
In 2008, Vodafone joined the UK Department for International Development’s (DFID) Business Call to Action (BCtA) with its pledge to increase access to financial services through its Vodafone Money Transfer platform known locally in Kenya, Tanzania, Fiji, Afghanistan, and South Africa as M-PESA or M-Paisa. The platform is saving recipients three hours and around 200 Ksh (US$2.59) per transaction because it reduces the need to travel to pay school fees, bills or transfer money.^⁸
With the switch from voucher books to electronic bank payments, social welfare recipients in Fiji are now able to access their payments in around 44 minutes compared to 28 hours, including travel and queuing time.^⁹

Electronic Payments Reduce Transportation Costs. In order to transport physical cash, drivers or couriers are needed in addition to payment for fuel and other logistical costs.

A recent survey of 139 central banks shows the average developing country has just two rural bank branches per 100,000 rural inhabitants.^¹⁰ As a result, people often have to travel long distances to collect social benefits or other payments in cash, which is dangerous because the money can get lost or stolen in transit without any hope for recovery.
Advances in communication technology and network capacities have led to innovative ways of reaching even the most rural areas through mobile devices, smart cards and other electronic methods, providing a more cost-effective and convenient way for people to receive payments.

^¹See “Governments Can Save Up to 75% with Electronic Payment Programs,” The World Bank, August 2, 2012

^² See “Banking the Poor via G2P Payments,” CGAP, December 2009.

^³ See “Banking the Poor via G2P Payments,” CGAP, December 2009.

^⁴ Bold et al (2012) available via

^⁵ McKinsey (2010) available via

^⁶ See “CGAP: Mobile Money in Haiti: Strategies for a Multi-Competitor, Multi-Industry Market,”

^⁷ Better Than Cash White Paper, Bankable Frontier Associates

^⁸ See “DFID Business Call to Action Case Studies,”

^⁹ See “G2P: Expanding Financial Inclusion in the Pacific Report,”

^¹⁰ Banking the Poor via G2P Payments, report by CGAP and the U.K.’s Department for International Development (DFIF).