Billionaires are known for not keeping spending a lot of green in their wallets. But that is not why Bill Gates hates cash. He hates it for its effect on people at the opposite end of the spectrum of wealth-the worlds poor and unbanked. The better than Cash Alliance, which was founded last September and is partially funded by the Bill & Melinda Gates Foundation, organized a breakfast today at the World Economic Forum in Davos, Switzerland. Speakers from the Philippines, Colombia and the U.S., among others, made the case for why electronic transactions are better than cash payments.
The five reasons, according to the alliance:
Transparency: Less corruption and theft when payments can be easily tracked. In Afghanistan, U.S. aid agencies use for workers is not as vulnerable to theft.
Security: The money goes where it should go.
Financial Inclusion: Electronic payment is a way for the unbanked to establish a record of timely payment of their bills. This may be a “ramp” for them to obtain other services, such as loans, speakers said.
Cost Savings: Moving physical cash around is more expensive than compressed electrons. Many poor people, however, still find it cheaper to use cash, as some networks cashless charge high fees.
Access to new markets: This benefit is primarily for financial services providers.
Kenya is an example for the developing world in regard to cashless payment. Its network M-Pesa, launched in 2007, has agents “on every block,” says Neal Keny-Guyer, CEO of Mercy Corps, a nonprofit organization that is a member of the alliance. Mauricio Cardenas, Colombia’s Minister of Finance said in an interview that he hopes that in the national legislature will pass a law allowing non-banks to carry cash and issue electronic receipts.
The key is to ensure that people who take the cash are well supervised as bank tellers. “We see this as a first step,” said Cardenas.