The main consumers of their nation’s payment systems are frequently the governments. Government efficiency, public welfare, and economic activity can all be improved by changing the way payments are made by governments.
By dictating how recipients get their payments, for as by mandating that funds be deposited into an account or a pre-paid card, governments can encourage financial inclusion. Using digitization to modernize government payments and collections can assist policymakers in achieving these objectives.
Governments all across the world have been forced to quickly distribute social-protection funds while preserving social distance due to the economic chaos brought on by the COVID-19 epidemic. As a result of these difficulties, numerous governments have implemented short-term digitization strategies, such as distributing social-protection payments via a chosen group of payment service providers. To efficiently distribute government payments, long-term, account-based, and non-account-based digital payment mechanisms are required.
Appropriate Digital Tools
Government payments must be digitalized strategically, which calls for careful planning and intensive collaboration at many different levels. Accurately identifying digitization hurdles, enhancing infrastructure, and updating regulatory and legislative frameworks are necessary for effective solutions. Numerous parties are involved in these projects, including the Treasury, government organizations, telecom companies, and payment service providers.
Several tools for digitizing government payments are covered in the technical note Tools for Digitizing Government Payments: Learnings from FISF by the World Bank. The note incorporates lessons learned from diverse strategies used in Cote d’Ivoire, Indonesia, Mozambique, Pakistan, and Zambia, among other countries, as part of the Financial Inclusion Support Framework (FISF) program.
Government payments can be digitalized using a variety of technologies. A cost-of-payments survey, for instance, can assist in determining the actual costs of payments, particularly retail payments. Understanding current payment flows can also benefit from mapping government payments and customer trips.
These evaluations can aid in locating opportunities and gaps for policymakers. And finally, successful digitization of government payments can be facilitated by an implementation roadmap that describes the order in which important activities should be completed.
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Applications Lessons
Implementation, which might be difficult, follows after choosing the major digitalization tools. Key implementation lessons from FISF countries include the following:
- To provide overarching strategic advice, multiple stakeholders must demonstrate high levels of commitment and good cooperation;
- A large digitization plan that is implemented gradually and in phases might help overcome obstacles and offer opportunities to learn from and address early implementation flaws;
- Beneficiaries should be permitted to select the payment delivery methods that are most convenient for them to foster convenience and advance financial inclusion by offering more payment options and service providers;
- Including training around “teachable” times in government payment procedures can help financial literacy initiatives become more effective, cut down on fraud, and promote financial inclusion;
- Digitization should not be hampered by a lack of suitable infrastructure, but problems with the infrastructure should be solved concurrently to enable general accessibility;
- If there is financial literacy training provided to encourage beneficiaries to use their accounts for more than just government payments, digital payments can be a gateway to other financial services.
Transition
Concerned organizations are urged to set up training programs for their staff in cutting-edge technology, payment methods, and cybersecurity and data privacy protection tools. They also need to increase public awareness of digital financial services.
The government’s initiative to create an inclusive digital finance ecosystem is in line with the National Strategy for Financial Inclusion 2022–2028 and the Digital Payments Transformation Roadmap 2020–2023. It will also support ongoing efforts to make formal financial services available to underserved and vulnerable groups.
90 days IRR
In accordance with EO 170, a Technical Working Group (TWG) may be established to offer recommendations, encourage cost-effectiveness, and advance transparency in covered agencies’ purchases of digital payment solutions.
The Departments of Finance (DOF), Budget and Management (DBM), Bureaus of Treasury (BTr), Internal Revenue (BIR), and the Government Procurement Policy Board Technical Support Office must all have representatives on the TWG. The TWG will keep an eye on covered agencies’ purchases of digital payment solutions to make sure they adhere to all applicable laws, rules, and regulations.
Within 90 days following the effective date of this Order, the DOF must issue the required implementing rules and regulations (IRR) in collaboration with the Bangko Sentral ng Pilipinas, Commission on Audit, DBM, BTr, BIR, and other pertinent government organizations. The tiering rules for the implementation of digital collections under Section 7 of this order must be included in the IRR, among other things.
Conclusion
Aside from encouraging providers to assist marginalized populations, policymakers must put financial consumer protection safeguards in place.
In the end, the selection of instruments for digitizing government payments should be adapted to the environment of each unique nation. If done correctly, digitizing government payments can promote the growth of the financial system and deliver much-needed services to the underprivileged and the impoverished.
