The Department for Work & Pensions (DWP) has linked up with PayPoint and ClearBank, a cloud-based clearing bank, to deliver the payments.
The system will use the secure digital platform i-movo, which is part of the PayPoint group.
Under the new initiative, called the Payment Exception Service (PES), each benefit or pension recipient can choose from a range of methods to receive their cash payment vouchers.
These can be used to withdraw funds at any one of 28,000 PayPoint retailers or 11,500 Post Office branches from today (9 September).
The i-movo platform was bought by the PayPoint Group in November 2020.
Nick Wiles, chief executive at PayPoint, said: “Through this new service, the unbanked will be able to receive their benefit payments simply, safely and conveniently, just like those who do have access to a bank account.
“Fundamental to its success is i-movo’s leading secure digital voucher technology. By drawing upon its experience of the last three years, we have worked with the DWP to deliver an innovative solution that brings new benefits to all stakeholders.
“However, this initiative has required an impressive level of teamwork, bringing together i-movo, the ClearBank platform and both the Post Office and PayPoint networks.”