Join the Better Than Cash Alliance
With 60 members, The Better Than Cash Alliance is partnering with governments, companies, and international organizations that are the key drivers behind the transition to make digital payments widely available.
Join us to improve lives through digital payments. Learn more about what you can expect from us as a member. For more information, please email firstname.lastname@example.org.
The Benefits of Digital Payments
More than 2 billion people in the world are still unable to participate in the formal financial system. The majority are women.
More than 2 billion people in the world are still unable to participate in the formal financial system. The majority are women. This makes it extremely difficult for poor people to save for the future, provide for their family’s health and children’s education, or invest in a business. The harsh reality is that the only way to make or receive payments for many poor people across the world is by using paper money in the informal sector - which is a barrier to the use of formal financial services. Cash-based transactions are also typically unsafe, expensive, inconvenient, inefficient, and lack transparency for governments, companies, and citizens alike.
When digital payments—whether on mobile phones, cards, or online —become available to everyone, everyone in the economy can benefit from the outcomes! These include:
- Cost savings through increased efficiency and speed
- Transparency and security by increasing accountability and tracking, reducing corruption and theft as a result
- Financial inclusion by advancing access to a range of financial services, including savings accounts and insurance products
- Women’s economic empowerment by giving women more control over their financial lives and improving economic opportunities
- Inclusive growth through building the institutions that form the bedrock of an economy and the cumulative effect of cost savings, increased transparency, financial inclusion, and greater women’s economic empowerment
1. Cost Savings
Governments, companies, and international organizations and individuals waste time and resources making and receiving inefficient cash payments. Digital payments can be made quickly and efficiently, which decreases overall costs.
- When Mexico digitized and centralized payments, the cost to distribute wages, pensions, and social welfare dropped by 3.3 percent—or nearly US $1.27 billion.
- India’s fuel subsidy program, which is the world’s largest cash transfer programme, has already saved $2 billion (131 billion Rupees) by paying cooking gas consumers directly into their bank accounts.
- In Niger, recipients of mobile transfers reduced the travel time to a cash-out point by 40 minutes compared to relying on manual cash distribution. This did not include the additional three hour wait time involved in a typical manual cash transfer. Based on average agricultural wages, the time savings attributable to the digital transfer channel for each payment translated into an amount large enough to feed a family of five for a day.
2. Transparency and Security
Transparency and accountability are harder to achieve with cash payments because they are anonymous and difficult to trace. Digital payments increase accountability and tracking, lessening the risk of corruption and theft.
- When Indian government officials made social security pension payments through digital smart cards instead of manual cash payouts at the village level, there was a 47 percent reduction in bribe demands, and the incidence of ghost recipients fell by 1.1 percentage points.
- In Uganda, Plan International adopted a program to repay participants for transportation costs through mobile phones. The digital payments increased transparency and reduced the security risks of cash handling.
- Digitizing the salary payments for national police offers in Afghanistan helped cut costs and leakages by helping spot “ghost” workers on the payroll and reducing opportunities for funds to be diverted.
3. Financial Inclusion
Digital payments have emerged as an important tool for advancing financial inclusion because it lowers the cost of providing financial services to poor people and increases the safety and convenience of using savings, payments, and insurance products.
- In Malawi, farmers who were offered digital direct deposits for cash crops invested 13 percent more in their farm inputs than those who received their crop sale proceeds in cash. Participating farmers saw a 21 percent increase in the value of their crop outputs and an 11 percent increase in household consumption after the harvest.
- In Mexico, there is evidence that digital accounts opened through a social transfer program increased frequency of remittances received through formal payment channels.
- In Colombia, 91 percent of the households being paid digitally through Familias en Accion obtained a card-linked bank account (source: Bold, Porteous, Rotman (2012); Maldonaldo & Tejerina IDB Technical Note 2010).
4. Women’s Economic Empowerment
Improving access to digital payments can empower women by giving them more control over family finances, increasing personal security, and improving their economic opportunities. Globally, 80 million unbanked women receive government wages or transfers in cash; 210 million unbanked women receive cash payments for the sale of agricultural goods; 585 million women pay for utilities in cash; and 225 million women pay school fees in cash.
- In response to a drought in Niger, unconditional cash transfers were given through m-transfers and m-money enabled mobile phones to women in 96 villages. Research showed digital transfers improved these women’s financial autonomy and decision-making capacity because the transfers were less observable to other family members. The households which received m-transfers were also more likely to cultivate marginal cash crops grown by women.
- In Bolivia, Peru, and the Philippines, women who received “goal-specific” savings reminders for school fees and housing via text messages increased savings by 16 percent.
5. Inclusive Growth
Integrating digital payments into the economies of emerging and developing nations addresses the critical issue of domestic resource mobilization. Digitizing payments also drives inclusive economic growth and individual financial empowerment.
- A study conducted by Moodys reported that between 2008 and 2012, greater usage of digital payments added $983B in global economic growth, which is the equivalent to creating 1.9M jobs.
- Financial inclusion has been broadly recognized as critical in reducing poverty and achieving inclusive economic growth. Greater access to financial services for both individuals and firms may help reduce income inequality and accelerate economic growth, according to the World Bank.