Making transactions that are carried out by the public every day digital could save the government up to £1.7 billion a year after 2015, according the publication of the government's Digital Strategy and Digital Efficiency report.
Digitising transactions, such as paying car tax, booking driving tests, completing tax returns, or applying for pensions, could also deliver savings of up to £1.2 billion over the next three years.
The government currently handles over one billion transactions every year through 650 different services. It has now said that any of those services that aren't digital, will have to be, and any under-utilised digital services will have to be redesigned.
It has said that it plans to make digital services 'so good' that they become the preferred option.
The publication also outlines that all central government departments will now be mandated to appoint a digital leader onto their executive boards.
Minister for the Cabinet Office, Francis Maude, said: "Britain is in a global race and that's why we need to have modern, efficient, digital-by-default public services that are fit for the 21st century.
"Building world-class government digital services will take time but the publication of this strategy just a fortnight after the launch of gov.uk is an important milestone. I'd like to pay tribute to the work of civil servants in the Government Digital Service and beyond who have shown how Whitehall can improve and adapt by embracing new ways of working."
He added: "Digital services are much more convenient because they can be accessed whenever you want them. They are also much more efficient, saving taxpayers' money and the user's time. Online transactions can be 20 times cheaper than by phone, 30 times cheaper than face-to-face, and up to 50 times cheaper than by post."
The seven Whitehall departments that handle the majority of central government service transactions, which includes HMRC, DWP and the Home Office, will be the first to start redesigning their services.
By the end of 2012 each of these departments will have to identify three significant services, with other 100,000 transactions a year, to be transformed into digital.
All new or redesigned transactional services going live after April 2014 from any department will have to meet a new digital-by-default service standard.
"This is a further example of the Civil Service Reform programme in action, where officials are embracing the best of what the web has to offer and radically changing their working practices to meet the challenges and opportunities inherent in digital by default," said Mike Bracken, executive director of Government Digital Service.
"This is the first time that the Government has produced a strategy in this way, a truly digital document which reflects our ambitions and signals a clear roadmap for working with departments to help them achieve the goals set out in this strategy."