G2P payments and mobile money

Lena Gronbagh

In recent years, the emergence of new financial technologies, including cellphone-based payment platforms and mobile wallets, has revolutionized the way people in developing countries send and receive money, pay bills, save, borrow and manage risk. Ten years after the launch of the highly successful M-PESA service in Kenya, the mobile money industry is processing close to a billion dollars per day, and with 690 million registered accounts worldwide mobile money has evolved into the leading payment platform for the digital economy in many emerging markets.

Initially most of these new financial platforms were used predominantly for person-to-person (P2P) transfers, such as domestic and cross-border remittances, as well as commercial transactions such as bill payments and mobile purchases. More recently, however, mobile money has emerged as a potential payment channel for government-to-person (G2P) payments, especially in countries that lack the traditional ‘brick-and-mortar’ banking infrastructure commonly found in developed economies. Mobile money promises a convenient and cost-effective payment solution for bulk transfers such as public sector wages and pensions, as well as for the rapidly expanding social cash transfer (SCT) programmes adopted by numerous developing country governments since the beginning of the 21st century. In addition to creating an attractive business case for financial and mobile service providers, this strategy also has the potential to boost financial inclusion and to facilitate access to (mobile-based) insurance, payment products, savings and credit in the low-income market.

Although the idea of using mobile money as a payment channel for SCTs is still relatively new in development circles, several countries have conducted pilot studies as part of the reform or the launch of their social assistance programmes. This paper provides a comparative overview of the emerging literature and empirical evidence of these pilots, covering a range of countries such as Haiti, Colombia, Uganda, Pakistan, Niger and the Philippines. It seeks to illustrate the different, yet in many ways similar experiences of these countries, as well as the main benefits and obstacles identified in this process. Further, it aims to inform the public and academic debate in South Africa where the use of mobile money as an alternative to cash grant disbursements is currently under discussion. Lastly, this paper also seeks to identify areas for further research with regard to the use of mobile money for G2P payments in the global South.

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