Governments around the world have within their hands a powerful catalyst to promote financial inclusion – their own payment interaction with low-income households. Indeed, government is frequently the largest micro-payer and bill payer in the country. Delivering government payments electronically will not only connect low-income households to an electronic grid, but the government itself will derive sizable benefits from automating these flows. A recent study by McKinsey, which was commissioned by the Bill & Melinda Gates Foundation, explores the inefficiencies in India’s government payment systems and estimates the monetary and non-monetary benefits of making all of India’s government payment flows electronic. The study finds that automating these payments could save the Indian government US $22.4 billion per year, equal to nearly 8 percent of the total payment flows between the government and its citizens.
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Keywords: electronic payments, financial access, financial inclusion, mobile banking, government payments
Lochan, Rajiv and Mas, Ignacio and Radcliffe, Daniel and Sinha, Supriyo and Tahilyani, Naveen, The Benefits to Government of Connecting Low-Income Households to an E-Payment
System: An Analysis in India (December 14, 2010). Lydian Payments Journal, No. 2, December 2010. Available at SSRN: http://ssrn.com/abstract=1725103