Why humanitarian aid charities need to rethink global cash disbursement now

Demand for humanitarian aid is growing

The United Nations estimates that nearly 300 million people around the world will need humanitarian aid in 2024.

In 2023, the UN estimated that global aid needs reached a high of almost $57 billion, a number that will continue to rise over the coming years as new conflicts, climate change and resulting rising food insecurity means more people need help.

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The use of cash is rapidly declining around the world

At the same time, the way this money needs to reach beneficiaries is changing. As an example, 91% of payments in Nigeria in 2019 were in cash. In 2023, that number had dropped to 54% and it is expected to drop further to 42% by 2027. In Nigeria cash is being replaced by cards, digital wallets such as Paga, PayPal or Carbon and account-to-account transactions.

India, Brazil, Ghana, Kenya and Senegal are other examples of countries that are transforming equally fast, but the trend away from cash is global. Cash as a % of total payments fell by 8% globally in 2023, and is expected to decline by 6% a year in the next few years. Like in Nigeria, cards, digital wallets and account-to-account transactions are expected to replace cash as well as mobile money in countries such as Kenya, Senegal and Bangladesh.

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What this means for humanitarian aid charities

This rapid move away from cash is both good and bad news for global charities.

The good news is that digital payments have important benefits over cash. They allow money to be disbursed instantly anytime anywhere in the world and time is always of the essence in global humanitarian aid. Secondly, digital payments are easily automated which not only reduces manual work but also reduces errors. Finally, it is easier to trace digital payments which leads to increased transparency and control.

Prepaid cards in particular have great potential in global humanitarian aid. Their reduced compliance requirements support financial inclusion by serving underbanked consumers. The ability to top them up instantly allows for instant disbursement and their global acceptance means they can be used anywhere in the world.

There are also some downsides to digital payments. The first is that the increased transparency combined with banks being under increased pressure to comply with anti-money laundering regulations can slow things down. This is particularly an issue in global humanitarian aid where it may be impossible or impractical for beneficiaries to provide all the documentation required to pass the banks’ Know Your Customer (KYC) checks.

The second downside is that, apart from cards, the new digital payment methods are globally fragmented. Every country has their own digital wallets, account-to-account and mobile money schemes. Even issuing cards is local. Acceptance of Visa and MasterCard is global but licences to issue cards are local.

Many of these issues can be overcome by using a payment orchestrator. To explain why, let’s look at what payment orchestration is.

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What is payment orchestration

A payment orchestrator is a company that connects to many different payment providers and adds value added services.

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In the context of disbursement of humanitarian aid, this includes:

• Connections to card issuing, mobile money and account-to-account payment providers around the world, either existing or the ability to quickly add them
• Software for charity staff to manage disbursement in bulk and view reports
• API to automate disbursement and reporting where possible
• Mobile app for beneficiaries to view their grant and access the payment methods

Orchestrators are different from aggregators. Aggregators earn money on every transaction and are thereby incentivized to steer the charity to the highest margin payment options. Orchestrators are software providers that charge for their software but pass payment costs through at cost or let the charity contract directly with the payment provider. This means orchestrators are incentivized to steer charities to the payment providers that best meet their needs.

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Why payment orchestration is the future of global cash disbursement

Orchestrators can connect to far more payment methods than a single charity could because they can spread the cost of connecting over many customers.

Having more payment methods results in a number of benefits to global humanitarian aid charities. They can:

• Use the lowest cost payment method for every situation
• Choose payment methods with appropriate compliance process for every situation
• Get greater global coverage
• Improve their negotiation position with payment providers by avoiding vendor lock in

Orchestrators also act as procurement sourcing agents for payment methods, helping charities select the right local providers and negotiating better fees by having a better understanding of cost structures and competition.

Using an orchestrator also means the charity has to only implement a single integration. This offers additional benefits:

• Consistent processes across all payment methods
• Consistent reporting and visibility across all payment methods
• Lower technical integration costs

About Yordex

Yordex is a payments orchestrator helping humanitarian aid organisations disburse funds globally instantly and at low cost. To find out more, please contact us.

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Sources:
Worldpay Global Payments Report 2024
McKinsey, the future of payments in Africa
UNOCHA forecasts

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