Government Toolkit: Context & Awareness
Why are governments shifting to digital payments?
Increasing evidence suggests the following reasons are driving the shift
|Cost saving||Moving from cash and check to digital payments significantly reduces cost to governments.||In Mexico, a 2013 BTCA case study estimated that the Mexican government had saved $1.3 billion, or 3.3% p.a.|
|Transparency||Digital payments improve traceability which reduces leakage of government payments to fraudulent or incorrect recipients. See further Digitizing improves transparency and promotes formalization.||In India, a recent study found that making social security payments digitally results in a 47% reduction in the incidence of bribe demands compared with cash payments.|
|Speed and security||Digital payments can be instantaneous, reducing the time the payee must wait to receive. Reducing the use of cash also improves security for recipients.||In the US, a recent study has found that moving from cash and check to electronic benefit payments is associated with a 10% reduction of the crime rate.|
|Financial inclusion||Digital government payments can be the first entry point additonal developmental reasons. such as reducing poverty for unbanked people, supporting the usage of new services for additional reasons||In Mexico, a recent study has found that accounts opened to receive social transfers led to increased frequency of receiving remittances also through formal channels.|
|Economic development||More digital payments leads to an increase in GDP of between 0.3% (developed) and 0.8% (emerging).||A 2013 Moody’s cross country study of 56 countries over five years reported this finding.|
Want to read more on the benefits of digitizing?
BTCA together with the World Bank and Bill & Melinda Gates Foundation brought out a 2014 report called The Opportunities of Digitizing Payments. In this report, the authors argue that digitizing payments will contribute significantly to reaching broader policy objectives and call for a renewed focus on governments to digitize their payments and receipts including social transfers.