HOFINET | Housing Finance Information Network

The Journey Toward 'Cash Lite'

Better Than Cash Alliance

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Abstract

In developed countries today, and in pockets in developing countries, electronic payments are widely accepted. In most cases, consumers can choose how they make and receive payments, balancing a range of attributes such as convenience, security, speed as well as cost. People often still use cash for small transactions. But they could barely imagine the inconvenience and risk of paying large bills or buying large household items such as furniture, or even a vehicle, in cash. It is all too easy to overlook or underestimate the value that even poor and rural households may attach to the improved security, convenience and privacy electronic payments can bring compared to cash. While cash may seem a benevolent ruler in a land of choice, it can be a tyrant in a place with few or no other options. Governments, the private sector and the development community distribute billions in cash payments worldwide in the form of benefits, pensions, social programs, humanitarian aid, or payroll. As bulk payers, these institutions have a unique role to play in initiating a deliberate, strategic shift toward electronic payment systems. Evidence from a range of sources indicates that such a shift brings material benefits for governments, the private sector and the development community, as well as for individuals—in terms of reduced costs, improved transparency, enhanced security, and access to financial services. The level and nature of the benefits of electronic payments depend on the size, and type of the payment, and, importantly, on the starting position before the shift. And realizing these benefits is often dependent on wider changes than the means of payment alone. In a world in which half of adults is now banked1, and the number of mobile subscriptions exceeds 86% of the world’s population2, the potential for widespread electronic payments seems higher than ever. Even a basic mobile phone can now be used to initiate and confirm a payment, just like a personal computer with an internet connection. Although there is a prevailing drift toward more electronic payments, there are significant barriers that can lengthen the transition, increase the costs or reduce the benefits, and even stall wide-scale adoption. Realizing the full potential of electronic payments will require leadership, coordination and sustained effort from governments, the private sector, and the international development community, often in poor and remote places. This study:
• Examines the three shifts to electronic payments;
• Aggregates the findings of a range of studies about the benefits of electronic payment adoption;
• Identifies barriers that need to be addressed in order to achieve a shift toward “cash lite”; and
• Concludes with a guide for governments, private sector businesses (as users of e-payments rather than as providers) and development organizations that wish to accelerate the shift to electronic payments.

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