Gov. to Person Payments
In recent years, governments in lower and middle income countries have been expanding social protection programs and are continuously shifting from in-kind assistance to cash transfers. In 2015, the World Bank’s State of Social Safety Nets report identified 589 programs in 145 developing countries and estimated that around 718 million recipients are enrolled in cash transfer programs--nearly 38 percent of the total estimated number of social safety net (SSN) recipients in developing countries.
With the evolution of national payment ecosystems and technological innovations that make financial services more accessible to remote and poor populations, including and most prominently in developing economies, governments and humanitarian agencies are realizing the possible efficiency gains of digitizing cash based assistance. While for the program management the most effectual gains from switching from in-kind or cash distribution to digital cash transfers are reduced administrative costs, better control of leakage and increased transparency, there is a significant potential of reaching a large part of the unbanked population by encouraging the use of formal financial services.
By 2014, the majority of cash transfer recipients globally—62 percent—were already receiving their benefits into an account or a mobile wallet. However, this trend is not as noticeable in low-income countries and among the poorest populations where cash disbursements are still dominating. According to the Global Findex 2014 there is an opportunity of linking up to 160 million unbanked adults to formal financial services by transferring government payments and wages directly into accounts or mobile wallets.
Yet, evidence from digital government-to-person (G2P) payment programs around the world cannot prove that opening accounts—or wallets—and transferring payments into these has an immediate financial inclusion effect. For example, Global Findex data revealed that 31 percent of accounts in low-income countries and globally seem to be ‘mailbox’ accounts used for only one or two withdrawals per month. Similarly, CGAP research in India found that 99 percent of the accounts opened for G2P disbursements were showing only one monthly transaction–a withdrawal of the total amount of the benefit transfer.
At CGAP we have explored and identified various reasons for the failed financial inclusion promise of digitizing social protection payments, ranging from use limitations of the account itself, insufficient recipient and agent training on using the accounts, negative and risky experiences by recipients trying to access and use these accounts, to the missing value proposition to intermediaries which translates into low quality products and customer service.
A new work stream at CGAP has started to explore good practices and designs for successful digitization of bulk payments, especially those targeting poor and often financially excluded populations. Building on prior research, CGAP combines its expertise in understanding the roles that policy, providers and the financial ecosystem play in advancing financial inclusion to develop a framework for digital bulk payments that are more valuable to citizens, governments and providers alike.
- CGAP Brief: Understanding Consumer Risks in Digital Social Payments
- CGAP Blog Series: Customer-centricity in digital social payments to the Poor
- CGAP Focus Note: Electronic G2P Payments: Evidence from Four Lower-Income Countries
- CGAP Focus Note: Social Cash Transfers and Financial Inclusion: Evidence from four middle-income countries
- CGAP Forum Paper: Eliminating Extreme Poverty
- CGAP Focus Note: Financially Inclusive Ecosystems: The Roles of Government Today
- CGAP Focus Note: Banking the Poor via G2P Payments
- CGAP slide deck: Consumer Insights From Bangladesh: Is a Transition to Mobile Wallets Underway in Bangladesh?
- CGAP G2P Research Project: Brazil Country Report
- CGAP G2P Research Project: Colombia Country Report
- CGAP Working Paper: Going Mobile With Conditional Cash Transfers
- CGAP Case Study: Mobile Money-Based Government-To-Person Payments In Haiti
- CGAP Brief: From Cash to Digital Transfers in India: The Story So Far
- CGAP Working Paper: An Overview of the G2P Payments Sector in India
- CGAP Working Paper: From Beneficiaries to Economic Citizens
- CGAP Slide Deck: Linking Electronic Payments and Social Cash Transfers in India
- CGAP Case Study: Shifting Food Assistance in Kenya to E-Payments
- CGAP G2P Research Project: Mexico Country Report
- CGAP Working Paper: An Overview of the G2P Payments Sector in Pakistan
- CGAP/MEDA Case Study: After Watan: The contributions of a G2P payments program to building a branchless banking industry
- Case study with female G2P social welfare recipients, in CGAP’s Insights Into Action: What Human-Centered Design Means for Financial Inclusion
- CGAP/IPA Working Paper: Financial Inclusion for the Rural Poor Using Agent Networks in Peru
- CGAP G2P Research Project: South Africa Report
- CGAP Case Study: Striving For E-Payments At Scale In The Philippines
- CGAP Case Study: E-Payments In Uganda With Limited Infrastructure