Responsible Finance Forum

Sustained Effort, Saving Billions: Lessons from the Mexican Government’s Shift to Electronic Payments

Guillermo Babatz
01 November 2013
Source:  Better Than Cash Alliance

Thanks to a concerted and well-planned shift to electronic distribution of many government payrolls, pensions and social benefits, the Government of Mexico is saving a significant amount of funds. In the first of the The Better Than Cash Alliance Case Study Series to be released, researchers identify the many billions that are estimated to be saved by the Mexican government each year. It also provides key lessons for other governments that are undergoing similar efforts around the world. The full report can be viewed in the Evidence Paper. An abridged version is available in highlights while the factsheet provides a quick overview of the findings.

Why Mexico transitioned to electronic payments In the mid-1990s, federal government spending in Mexico was highly decentralized:

  • Dependencias had one or more accounts at commercial banks;
  • Tesofe maintained accounts at these same banks;
  • When Dependencias requested their budgetary appropriations, Tesofe transferred the money — within the banks — from its accounts into those of the Dependencias, where it sat until being disbursed. The process provided ample opportunity for delay and confusion:
  • Dependencias had to hand-deliver the paperwork showing they were entitled to the transfer;
  • Tesofe had wide discretion on the timing to execute transfers;
  • Tesofe had no means to assess whether the money was spent as authorized; and
  • There were no centralized guidelines outlining the remuneration banks had to offer the Dependencias in return for keeping the float in their accounts prior to disbursement.