Cash vs Digital: How do digital government-to-person payments ease the lives of recipients?

Imagine having to take a day off work, travel a long distance and wait in line for several hours, rain or shine, to collect assistance or wage payments from the government. Now imagine having to repeat this process every month. This is the reality for millions of people worldwide whose livelihoods depend on government payments and still receive these payments in cash.

Digitalizing these government-to-person (G2P) payments offers an opportunity for many to access their first formal bank account. Account ownership can then open the door to other financial services that can improve people’s lives. Even in cases where recipients might have to withdraw their full payment, simply having their payments deposited digitally can make their lives easier -- making the recurrent experience less expensive, safer, more flexible, and overall, more accessible. A digital payment experience that is more accessible and easier than cash payments for recipients will be an integral first step to eventually using their accounts and making digital payments with ease.

The World Bank’s G2Px initiative supports research across the globe to learn what works (and doesn’t) based on experience from recipients receiving digital G2P payments. This data and research then informs the design of World Bank programs in countries.

Findings from qualitative studies across six countries show that digital G2P payments improved recipient's experience in many ways including:

1. Reduced travel time and cost of collecting payments: 

When payments are made in cash, distribution typically occurs in a government office or similar location, with restrictions on the day and time for recipients to collect their payments. Conversely, when payments are sent digitally, they can usually be withdrawn from multiple locations or cash-out points, such as at ATMs, bank branches and banking agents. In most cases, digital payments allow recipients to collect their payments more easily at a lower cost. In Mali, recipients who received payments into mobile money accounts under the Jigisèmèjiri emergency social safety net program appreciated being able to simply walk to the nearest agent.  Similarly, recipients of the Vision Umurenge program (VUP) in Rwanda highlighted the significant cost savings from mobile money payments with reduced travel.

Easier access can also reduce time away from work and potentially improve public service delivery when salary payments for government workers are digitized. In the Central African Republic, public wage recipients expressed a high level of satisfaction with mobile money salary payments given lower travel times. Before 2020, many noted that they had to travel long distances, often up to two days, to receive their salary in cash which meant they were also not at their duty post during that time which in turn could lead to delays in the services they were providing to people. 

2. More flexibility on when to withdraw funds: 

Digital payments offer more flexibility given that recipients can withdraw at a time that best suits them, from a variety of access points. In Morocco, recipients of the DAAM program valued receiving payments into an account as it enables ATM withdrawals to be made 24 hours a day, with no waiting time.

 
3. Shorter wait time to withdraw payments: 

A greater number of cash-out points and flexibility on when to cash out also translate into shorter lines and wait times at the withdrawal point. For instance, in the Philippines, recipients had very different experiences with waiting time depending on the access point they used. In general, however, digital payments used during the second round of the COVID-19 Social Amelioration Program, led to a 40-minute reduction in average wait time versus payments delivered in cash during the first round.

G2P digitalization needs to be designed with recipients at the center to maximize benefits.

While having a better experience with digital payments (as opposed to cash payments) has been documented among many digital G2P payment recipients, it is not a guarantee. Challenges with travel time, cost and waiting can persist in areas where agent, ATMs or bank branches might be scarce. In Bolivia, research conducted in 2022 found that recipients of Renta Dignidad, a universal social pension scheme, needed to withdraw their payments in cash because of limited access points but also recognized the challenge of having to travel every time a payment is made. Another obstacle is ensuring adequate cash availability across access points. Until digital payment ecosystems are further developed, and recipients build more trust with digital payments, fully cashing-out payments the same day when it is received will be commonplace.

 
There could also be a range of recipient-specific challenges, such as their digital and financial literacy. Indeed, practitioners need to carefully design the roll out of digital G2P payments, focusing on the specific needs of users. Leveraging research like many of the examples highlighted will help better understand, by hearing directly from recipients, what works and what can be improved when it comes to adopting good policy and design choices that put recipients at the center.