Partners should build on progress made in Colombia’s shift to electronic payments, says study by UN-based Alliance
  • January 28, 2015

Colombia has made significant strides in the shift to electronic payments, but further progress in addressing informal cash economy and increasing merchant acceptance and consumer adoption is needed to further advance the shift to digital payments in the country, according to a new report released by Better than Cash Alliance.

The comprehensive market diagnostic found that an astounding 69% of the value of money changing hands in Colombia each month is paid electronically. By this measure, Colombia could be considered a “cash-lite” economy. Yet this represents only 9.7% of the 828 million payments made monthly in 2012, indicating that while the large value payments are made digitally, the majority of small and medium value payments by Colombians are still made in cash.

“We have already transitioned the majority of government payment streams from cash to electronic and we are committed to transitioning the remainder where possible,” said Andrés Escobar, Vice Minister from the Ministry of Finance of the Republic of Colombia. “Because we recognize the benefits of digital payments to individuals, businesses, and the economy as a whole, we are continuing to define enabling regulation and otherwise support broader use of electronic payments in the economy.  Becoming a Country Member of the Better Than Cash Alliance connects us with other countries around the world that recognize the benefits of electronic payments for greater efficiency and transparency and as a means to promote greater financial inclusion.”

Government leadership has been a major factor in the progress to date. Government payments—whether from federal to state and municipal level governments, salaries, social transfers to individuals, and payments to suppliers—are largely electronic (94% by value, 76% by volume).  Bulk payments in the private sector are also shifting (47% by value, 29% by volume), but there are opportunities to accelerate, for example through encouraging businesses to shift salary payments to digital as well as supplier payments.  There is considerable scope for shifting bill and tax payments, which at present are made electronically 62% by value but only 21% by volume, according to the report1.

The shift which has the farthest to go is on consumer purchases.  The report finds that this is due to high costs for merchants to enroll in payment card programs, limited value proposition for banks to expand networks and payment instruments, low levels of access of consumers to debit cards, and inability of merchants to retain Value Added Tax.

“Colombia has made tremendous progress in shifting from cash to electronic payments, in bulk payments as well as in its social welfare programs that are connecting many people to bank accounts for the first time.  What is particularly exciting is the commitment that the government has made to further that shift by working together with others, including businesses and payment providers to address key barriers to the shift.  The experiences here in Colombia can provide valuable lessons elsewhere in the region and even globally,” said Beth Porter, Policy Advisor, Financial Inclusion, UNCDF, and Advisor of the Better Than Cash Alliance.

The announcement today that the whole of government is joining the Better Than Cash Alliance builds on the earlier commitment of the Department of Social Prosperity (DPS), as one of the first members of the Alliance.  “The Department of Social Prosperity is proud to have played a leading role within Colombia in using digital payments as an onramp to financial inclusion,” stated Tatyana Orozco de la Cruz, DPS Director.  “Over three million beneficiaries of Familias en Accion and other recipients of conditional cash transfers, as well as victims of internal conflict have received their payments electronically into their own bank accounts, providing them a means not only to receive their social welfare payment, but also enable them to save and build a financial history,”

A key enabler of the shift is the public and private collaboration.  The government catalyzed the creation of the clearinghouse ACH Colombia, which then developed Colombia’s e-payment platform2, Pagos Seguros en Linea (PSE).  PSE brought together Colombian banks to define commercial agreements that would create an interoperable e-payment platform.  This platform enables efficient and cost-saving means of making online e-payments through bank transfers. Between 2008 and 2012, the number of payments on PSE increased more than tenfold to almost 1 million a month. By March 2014, there were 2 million PSE transactions per month – remarkable in a country with only 80 million monthly total electronic payments.

The benefits of such a shift can be particularly powerful for rural communities, providing efficient and transparent channels for payments—and when done deliberately, providing financial inclusion benefits.  The Colombian Coffee Growers Federation has been able to successfully reach rural communities with its Smart Coffee ID card for payments to coffee growers, saving $15.5 million, or 80% of the cost of making those payments in cash.3  In order to ensure interoperability of the card and incentivize farmers to use the card for making payments and saving, instead of simply cashing out the value, the Federation and Banco de Bogota have moved to a new stage, offering a savings account that includes a franchised debit card, without costs for the coffee growers. This is expected to result in continued efficiencies and transparency for the Federation, while providing substantial financial inclusion benefits for coffee growers.

The Colombia diagnostic is the first of its kind to be released by the Better Than Cash Alliance.  The diagnostic was undertaken by a team from Bankable Frontiers Associates (BFA) under the direction of Beatriz Marulanda, with the support of the Ministry of Finance and the Department of Social Prosperity of Colombia. Furthermore, two case studies have also been launched to showcase the important of private and public sector collaboration, benefits of interoperability, and importance of building in financial inclusion considerations.

About Better Than Cash Alliance

The Better Than Cash Alliance partners with governments, the development community and the private sector to empower people by shifting from cash to electronic payments. The Better Than Cash Alliance is funded by the Bill & Melinda Gates Foundation, Citi, Ford Foundation, MasterCard, Omidyar Network, USAID and Visa Inc. The UN Capital Development Fund serves as the secretariat. To learn more, visit, follow @BetterThan_Cash and subscribe for news at

Country Diagnostic: Colombia, Better Than Cash Alliance, January 2015. Data is based on initial estimates based on assumptions, reflecting a baseline.  
2 Colombia’s Online E-Payment Approach: Private Sector Innovation Inspired by Government Vision, Better Than Cash Alliance, January 2015.
3 Colombia’s Smart Coffee ID card: Digitizing Payments in a Rural Region, Better Than Cash Alliance, January 2015.