Ideas & Updates

The Better Than Cash Journey: Colombia & Malawi

This is the second in a series of articles written by Maura Hart on the achievements of several Better Than Cash Alliance members. These highlights capture the innovative work by governments, businesses and development organizations to fulfill their commitment to transition from cash to digital payments.

Colombia: An Innovative Approach To Digital Payments

The Better Than Cash Journey: Colombia & Malawi-1

A comprehensive market diagnostic, released by the Better Than Cash Alliance in January 2015, found that an astounding 69 percent of the value of money changing hands in Colombia each month is paid digitally. By this measure, Colombia could be considered a “cash-lite” economy.

Yet this represents only 9.7 percent of the 828 million payments made monthly in 2012, indicating that the majority of small and medium value payments by Colombians are still made in cash. Since joining the Better Than Cash Alliance, we have seen enormous progress as Colombia works to shift that tide.

Spurred by government policy, Colombian banks came together to create an efficient and cost-saving means of making digital payments through bank transfers. Whereas many governments may attempt to create their own solution, the Colombia Pagos Seguros en Línea (Secure Online Payments, or PSE for its acronym in Spanish) showcases an alternative approach where a government’s vision can incentivize the private sector to collaborate and innovate. Like any digital payment option, PSE delivers significant cost reductions compared to cash for the financial service providers.


PSE authorizes digital payments directly from bank accounts to government agencies or businesses in Colombia. This means when a customer or business with a bank account visits a PSE-affiliated government or business website, they can pay electronically. Between 2008-2012 the number of payments on PSE increased more than tenfold to almost a million a month.

By March 2014, there were 2 million PSE transactions per month — in a country with only 80 million monthly total digital payments. For utility and bill payments, PSE is replacing the use of other older payment approaches, notably cash, checks, and bank drafts, which take longer and are more expensive. The story of how Colombia established the online e-payment platform and increased adoption offers useful insights for countries that are ready for the ‘second shift’ in the journey to cash lite: large numbers of bill payers begin switching to electronic payments.

The Colombian Coffee Growers Association has amassed remarkable savings by shifting payments to coffee growers from cash to payment cards. Payments are now made through a Smart Coffee ID card, which was originally intended for paying farmers for their coffee harvests, but expanded into an efficient, transparent channel for the distribution of government subsidies and credits.

Using the Smart Coffee ID card for payments has saved them $15.5 million over seven years and is an excellent example of how the benefits of digital payments can be brought to rural areas.

In January 2015, the Alliance along with the Department of Social Prosperity and Ministry of Finance hosted an event in Bogota entitled “Achieving an Ecosystem Approach to Digital Payments in Colombia” bringing together representatives of the government, corporate and development sectors.

At the event, Andrés Escobar, Vice Minister from the Ministry of Finance of the Republic of Colombia said: “We have already transitioned the majority of government payment streams from cash to electronic and we are committed to transitioning the remainder where possible,” He added, “Because we recognize the benefits of digital payments to individuals, businesses, and the economy as a whole, we are continuing to define enabling regulation and otherwise support broader use of electronic payments in the economy.”

Malawi: Making A Mark To Shift To Digital

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Malawi has been a committed member of the Better Than Cash Alliance since June 2013 with many ongoing initiatives to progress the shift from cash to digital, including the launch of National Switch in January 2015, a shared platform for all commercial banks in Malawi. The country took a significant step toward creating a digital payment ecosystem just recently. Together with the Better Than Cash Alliance and Mobile Money for the Poor, an initiative of the United Nations Capital Development Fund (UNCDF), the Government of Malawi hosted an event in April 2015 bringing together digital payments players to accelerate the progress of digital finance in Malawi. The convening also marked the release of an in-depth analysis of the country’s readiness to transition from a nearly cash-only economy to one where digital payments are widely available through an ecosystem approach. The research was conducted through a partnership between the Malawian Ministry of Finance, the Reserve Bank of Malawi and the Better Than Cash Alliance, and is entitled The Opportunities for Malawi’s Transition Away from Cash.


The report detailed the current state of Malawian digital payments, providing an important baseline to track progress. The study also identified four potential opportunities for Malawi, including the Government advancing on digitizing its centralized payment system with support from banks, and merchants accelerating digital payment acceptance via mobile money and debit card at the point of sale.

According to UNCDF, in least developed countries such as Malawi mobile penetration is at 30 percent while access to a bank account is at 14 percent. Mobile payments can be one way to accelerate this shift. As part of the Mobile Money for the Poor program, UNCDF plans to provide technical and financial assistance to build capacity in public and private sector organizations to support the switch from cash to digital for the most promising payments streams identified in the research.

Transitioning from cash to digital payments is a complex process, requiring collaboration between the government and businesses, as well as building trust and increasing familiarity among citizens. This is why the April convening was so significant – leading figures came together to discuss the diagnostic data and develop a blueprint for the country’s digital payments future.

By working collaboratively to address the barriers to transitioning payments from cash to digital, Malawi can accelerate the shift as well as the opportunities for financial inclusion that it brings.

By undertaking this research and using it to plan its shift away from cash, Malawi’s approach can set an example for other countries in the early stages of transitioning to digital payments.