Beyond the COVID-19 Crisis: A Framework for Sustainable Government-To-Person Mobile Money Transfers
  • 1 https://isni.org/isni/0000000404811396, International Monetary Fund
  • | 2 https://isni.org/isni/0000000404811396, International Monetary Fund
  • | 3 https://isni.org/isni/0000000404811396, International Monetary Fund
  • | 4 https://isni.org/isni/0000000404811396, International Monetary Fund

Contributor Notes

During the 2020 pandemic, the majority of countries have provided income support to households at an unprecedented speed and scale. Social distancing measures and the large penetration of mobile phones in emerging markets and developing economies (EMDEs) have encouraged government-to-person (G2P) transfers through mobile platforms. This paper presents a comprehensive framework for sustainable money solutions in support of social assistance. The framework consists of eight building blocks that may help policymakers i) take stock and assess emergency fixes taken to scale up mobile money in a crisis context and ii) develop sustainable long-term solutions for mobile G2P transfers.

Abstract

During the 2020 pandemic, the majority of countries have provided income support to households at an unprecedented speed and scale. Social distancing measures and the large penetration of mobile phones in emerging markets and developing economies (EMDEs) have encouraged government-to-person (G2P) transfers through mobile platforms. This paper presents a comprehensive framework for sustainable money solutions in support of social assistance. The framework consists of eight building blocks that may help policymakers i) take stock and assess emergency fixes taken to scale up mobile money in a crisis context and ii) develop sustainable long-term solutions for mobile G2P transfers.

I. Background

A. Scaling Up Government to Person (G2P) Social Transfers During a Crisis Like No Other

As the COVID-19 crisis unfolds, countries across the world have promptly expanded their social protection systems to provide support to workers and households. On average, countries have spent an additional 1 percent of GDP to flex up pre-existing social programs—insurance, assistance and labor market-related—and introduced new ones.2 Additional fiscal outlays have mainly financed the expansion of social assistance systems to cover over 1.8 billion people worldwide (Gentilini et al. 2020). Countries most often chose G2P monetary transfers, representing about 51 percent of all social measures planned and/or implemented, with a population coverage that has more than doubled to 38 percent on average over 5 months only (Figure 1).

Figure 1:
Figure 1:

Existing, Additional and Total Population Coverage of Monetary Transfers During COVID-19

Citation: IMF Working Papers 2020, 198; 10.5089/9781513557670.001.A001

Source: Gentilini et al, 2020.Note: Sample of 57 countries. EAP: East Asia and Pacific; ECA: Europe and Central Asia; LAC: Latin America and Caribbean; MENA: Middle East and North Africa; SA: South Asia; SSA: Sub-Saharan Africa.

Scalability and reachability of G2P transfers are essential as the COVID-19 crisis requires governments to cast safety nets much more broadly than in conventional shock-response. The pandemic and containment measures are impacting all economic sectors, generating large negative income shocks across the board and proportionately more so at the bottom half of the income distribution (Figure 2) and among informal business owners.3 Many countries have combined different forms of benefit programs—monetary and in-kind, digital and analog, old and new—to broaden their support to households with little or no previous links to social protection systems and maximize their reach.

Figure 2.
Figure 2.

Population in need of support after a COVID-type shock

Citation: IMF Working Papers 2020, 198; 10.5089/9781513557670.001.A001

Source: Authors on Barca and Beazley (2019).Note: Zones in red-dashed ovals represent new people in need of (additional) support after a shock. Social protection halo refers to households whose welfare conditions are close to social programs’ eligibility thresholds, making them vulnerable to income shocks and likely to become eligible for support systems.

The rapid expansion of G2P transfers bears several risks, from duplication and high administrative costs, to the risk of undermining existing, well-functioning social programs if they are improperly repurposed for COVID-19 response efforts. For instance, the Philippines government decided to roll out an Emergency Subsidy Program targeting 75 percent of its population and automatically enrolling beneficiaries of their flagship conditional cash transfer program— Pamilyang Pilipino Program. However, some confusion over the transparency of rules and unclear communication, combined with changes to the original program’s selection and delivery modalities, created social discontent (Fischer, 2020). Therefore, countries that have invested in building scalable and shock-responsive social safety nets are in better shape to face COVID-type crises.

Many EMDEs must build on weak and patchy social protection systems, and often lack crucial information to further expand them. Often, existing social programs have low coverage at the bottom of the income distribution, i.e., percentage of bottom income quintile population receiving social protection benefits/support, and provide insufficient benefits (Figure 3a). Informality further compounds these structural weaknesses (Figure 3b) because targeting public support based on means requires verifiable information on employment and income. This type of data is typically only available for workers in the formal sector that are officially registered as employees or self-employed and potentially liable for payment of income and social security taxes. The lack of such data for informal workers therefore restricts the ability of governments to effectively target resources to most affected households. Even in the formal sector of the economy support channels have limited ability to provide liquidity to employers (through loans or grants) so that they can pay their employees throughout the crisis.4

Figure 3:
Figure 3:

Coverage of Social Assistance Programs and Share of Informal Economy, by Income Group and Region

(percent)

Citation: IMF Working Papers 2020, 198; 10.5089/9781513557670.001.A001

Source: World Bank Aspire data and Medina and Schneider (2018).Note: EAP: East Asia and Pacific; ECA: Europe and Central Asia; LAC: Latin America and Caribbean; MENA: Middle East and North Africa; SA: South Asia; SSA: Sub-Saharan Africa. Figure 3a excludes high-income countries (World Bank classification).

B. The Importance of Basic Delivery Components

Governments’ ability to reach workers and households with lifeline support differs vastly across countries depending on the availability of basic delivery components.5 Three key integrated elements are at the core of the delivery of broad and adequate income support: a universal identification (ID) system, socioeconomic data on households, and a mode of benefit delivery (Figure 4 a). Not all countries have such a trinity ready to roll out emergency lifeline support, leading to unavoidable prioritization across competing objectives in the short run, i.e., broad population coverage of lifeline support, fiscal sustainability, and virus containment. In this respect, a simple taxonomy of countries can be described with respect to the expansion-readiness of their social assistance measures (Figure 4 b):

  • Ready. Countries with wide prior coverage for two of the three elements are ready to leverage their delivery infrastructure and provide support at scale. For instance, Pakistan has a robust national ID system and a social registry covering 87 percent of its population; over the past decade, India has integrated its universal biometric ID system, Aadhaar, with bank accounts and social programs;

  • In-between. Countries with some patchy assets. For instance, 75 percent of the Philippines population is covered by its social registry, but a reliable ID system is lacking, and bank coverage is limited;6 Bangladesh and Togo have high mobile money penetration but no robust ID system;

  • Not started. Mainly very low-income countries with a narrow or no safety net and only rudimentary delivery platforms (e.g., Haiti, Lao PDR).

Figure 4.
Figure 4.

Basic Trinity of Population Reachability

Citation: IMF Working Papers 2020, 198; 10.5089/9781513557670.001.A001

Source: Authors and Leite et al. (2017), World Bank Global Findex.Note: In Figure 4 b, “digital payments” refers to the share of population aged 15 and above who reports having made a digital payment—through mobile money, debit/credit card, mobile phone, or the internet—in the past year.

Countries have put in place emergency fixes to overcome delivery infrastructure weaknesses, with G2P mobile transfers being key to governments’ response, especially in high informality contexts. Governments are leveraging the high penetration of mobile phones and mobile accounts7 relative to bank access points, to rapidly scale up their monetary support to workers and households (Figure 5 a, b). Mobile money8 is a key platform to reach informal business owners who tend to have a higher usage of mobile money than the average population (World Bank Group, 2020b).9 Mobile networks can be used to achieve multiple objectives: i) disseminate crucial information, ii) help collect key household and individual data in order to better target support, and iii) provide a platform to deliver money:

  • In Brazil, the temporary Auxilio Emergencial targeted mainly at informal and own-account workers is delivered through mobile money accounts, with citizens registering via a website or an app. Eligible workers are given the option to open a mobile savings account at one state-owned bank which provides basic functionality;

  • In Togo, the authorities have introduced a new cashless transfer program, Novissi, targeting adult workers in the informal economy impacted by the lockdown measures—e.g., moto taxi drivers. Beneficiaries are identified through their voter IDs which has broader coverage than national IDs.10 Transfers are then made through mobile money, with a top-up for women recipients, and digital payments are further encouraged—e.g., for utility bills—to avoid handling cash;

  • In Peru, informal workers eligible for the Bono Independiente scheme receive a code and a link to access a simplified mobile banking system through SMS when they do not have a bank account;

  • Nigeria partnered with mobile network operators to identify vulnerable informal workers in urban areas through airtime purchase patterns.

Figure 5:
Figure 5:

Coverage of Financial Account, Mobile Phone Ownership and Mobile Money Account, by Region – 2019

(percent and million)

Citation: IMF Working Papers 2020, 198; 10.5089/9781513557670.001.A001

Source: CGD (2020) and GSMA (2020).Note: EAP: East Asia and Pacific; ECA: Europe and Central Asia; LAC: Latin America and Caribbean; MENA: Middle East and North Africa; SA: South Asia; SSA: Sub-Saharan Africa.

C. Strong G2P Mobile Transfers for Strong Social Protection Systems

G2P mobile transfers present many advantages relative to other forms of governmental transfers (Table 1), all the more in the context of social distancing. About 20 percent of developing countries use cash for social benefits payments, often because their financial ecosystems remain underdeveloped. However, in-person cash provision presents many logistic (transportation, security, payment dates), health, and individual challenges (e.g., costs to beneficiaries to receive payments at a scheduled time and place) that G2P mobile transfers can help overcome. For instance, in Niger, program recipients receiving cash had to travel approximately 2 km (one way), or about half an hour, to receive the transfer, while the group receiving transfers via mobile money had to travel less than 0.5 km (less than 10 minutes)(Aker et al. 2016). Mobile transfer platforms can serve as foundation to promote strong social protection systems that provide equitable and effective coverage for the poor and those who are vulnerable to poverty. G2P mobile transfers can support inclusive growth (i.e., by bringing financial accounts to the unbanked, both for the purpose of savings and building credit history, empowering women financially, and helping small and medium enterprises grow within the formal sector) and efficient government operations (i.e., by providing support more rapidly while avoiding leakages through more transparent and efficient management of public resources).11

Table 1.

Channels to deliver G2P payments12

article image
Source: G2Px

G2P mobile transfers should be supported by a comprehensive and sustainable ecosystem to fully exploit their advantages. As countries transition from emergency measures to normal operational mode, quick fixes implemented to scale up lifeline programs must be revisited and strengthened in support of stronger social protection systems and strategic national goals like inclusive growth. Emphasis should be on strengthening the scalability of social protection systems, incorporating shock-responsive design features,13 and limiting program exclusion errors from the outset in a fiscally sustainable manner (progressive universalism).14 G2P mobile transfers cannot provide adequate solutions to all social protection challenges and they must complement other types of support programs—e.g., in-cash or food distribution systems.15 But they can play a key role within stronger social protection systems, provided governments are aware of and follow a few design and implementation steps. In the following section, these steps are detailed within a comprehensive framework that will help governments make the most of G2P mobile transfers.

II. An end-to-end framework to guide evolution of Mobile G2P Payments

A holistic framework, based on past G2P and mobile payment experiences, can inform short-term measures taken in context of the pandemic crisis, to ensure they are sustainable, mitigate risks, and allow iterative improvements. This section describes a framework to enable a sustainable G2P monetary transfer via mobile payment (“mobile G2P”) program.16 It is composed of eight building blocks (Figure 6) that help stakeholders assess the country’s readiness in implementing mobile G2P along key enablers (Figure 8). These enablers are explained in detail in Appendix 1, which describes various implementation paths to increase the maturity level depending on the country’s existing conditions.

Figure 6:
Figure 6:

Eight “building blocks” for a sustainable Mobile G2P Framework

Citation: IMF Working Papers 2020, 198; 10.5089/9781513557670.001.A001

Source: Authors.
Figure 7:
Figure 7:

How G2P mobile cash typically flows from government to the unbanked and other participants

Citation: IMF Working Papers 2020, 198; 10.5089/9781513557670.001.A001

Sources: Digital Disruptions, GSMA, Orange Money, Authors.
Figure 8:
Figure 8:

Each of the eight building blocks relies on key “enablers” that support various degrees of mobile ecosystem’s maturity.

Citation: IMF Working Papers 2020, 198; 10.5089/9781513557670.001.A001

Source: Authors.

The building blocks reflect the end-to-end money flow in a mobile G2P ecosystem. A government introducing a new G2P mobile money program to reach both banked and unbanked individuals will often follow the steps presented in Figure 7:

  • 1. The government selects one or multiple mobile money operators (MMOs) such as mobile network operators (MNOs, e.g., Orange), commercial banks, or fintech firms, which offer mobile money in the country;

  • 2. Existing national databases or MMO data are used to select applicants who meet the program’s eligibility criteria;17

  • 3. The government wires the money to the bank partnering with the MMOs and shares the identity of eligible recipients;

  • 4. Banks convert these funds into mobile money;

  • 5. MMOs organize information and outreach campaigns to help beneficiaries apply through an established Know-Your-Customer (KYC) process using the identity scheme agreed with the government;

  • 6. Recipients are given a mobile wallet containing the amount of mobile cash distributed by the government.18

From there, mobile wallet owners can either cash-out the money, typically through a local agent partnering with the MMO, use it directly to pay utility bills or purchase goods and services at merchants (person to business (P2B) payment) who accept mobile money. The latter scenario supports social distancing in the COVID-19 context. The framework will show the required infrastructure to facilitate P2B mobile payments. The rest of the paper describes key enablers supporting such programs.

A clear understanding of the role and risks of each of the eight interdependent building blocks is critical for a successful mobile G2P program. The eight building blocks are designed to signal to policymakers and regulators where and how to adapt their country’s regulatory framework in support of G2P mobile transfers. Each building block plays a specific role in the success of a mobile G2P program. If any of these blocks is not properly managed or designed, the program may face serious risks. For example, failing to properly design and regulate the role of financial institutions and mobile money operators (MMOs) may diminish the trust that unbanked individuals have in mobile cash. Likewise, if policymakers fail to properly incentivize acceptance of mobile money within a sufficiently large merchant network, beneficiaries would all exchange their mobile money for cash. This would potentially create long lines at cash-out agent offices, violate social distancing measures, and increase individual costs to receive the benefit.

Policymakers should approach the key enablers as minimum conditions for different maturity levels of their mobile G2P program and plan iterative improvements. As countries have been forced to deliver monetary assistance under time pressure, those with a mature mobile money ecosystem in place (e.g., Kenya, Tanzania, China) have been able to react faster and more effectively (Rutkowski and others, 2020). However, many countries have been able to transfer mobile cash despite the low maturity levels of their mobile ecosystem, suggesting some key enablers are within reach of many EMDEs. This paper presents three maturity stages (Figure 8 and Figure 9) that countries can achieve for each key enabler:

  • 1. Having the “minimum required” enablers can place the mobile G2P program on an easier improvement trajectory;

  • 2. Adding “good-to-have” enablers further allows G2P programs to reach broader segments of a better identified population, to limit certain risks, and to achieve economies of scale;

  • 3. Finally, “great-to-have” enablers are moving targets (as technology and adoption patterns change), but represent the current state of the art, today better illustrated by M-Pesa in Kenya, WeChat Pay and Alipay in China.

Figure 9:
Figure 9:

The framework maturity table (Appendix I) helps stakeholders to identify their current situation, as well as possible evolution strategies.

Citation: IMF Working Papers 2020, 198; 10.5089/9781513557670.001.A001

Source: Authors.

Risks are correlated to the level of maturity of each building block, and always exist even when “great-to-have” enablers are in place. While low-maturity levels face well-known risks such as fraud, corruption, or human mistakes, higher maturity levels also carry risks, sometimes new, such as cyber-fraud or digital privacy, that must be mitigated (section III and Appendix 1).

A. Building Block 1: Beneficiaries

This framework promotes a user-centric approach that places beneficiaries at the center of each of the building blocks. The design of G2P cash programs must answer three important questions: Who is eligible? How do they prove their identity? How to maximize adoption by beneficiaries? These three “enablers” are informed by previous G2P experiences in different countries, and by measures introduced during the pandemic crisis:

  • Eligibility Criteria. These must rely on information broadly available across the population in order to minimize inclusion and exclusion errors. Criteria must further be as transparent as possible in order to minimize applicants’ rejection probability, and as simple as possible—e.g., basic demographic characteristics such as age, gender, household composition, or geographical targeting—in the crisis context.19 Finally, designing exclusion criteria may be easier than inclusion criteria if the risk of exclusion of many households in need of support is high. The success of the Keluarga Harapan program in Indonesia in 2017 was based on precise data from the Ministry of Social Affairs for mobile money transfers to pregnant and lactating mothers, infants, elderly and people with disabilities (Sri Sulastri, 2019). Likewise, India communicated exclusion criteria for its transfer program during COVID-19 clearly, such as specific professions or individuals paying personal income tax.20 Absence of reliable citizen registries might force policymakers to make difficult trade-offs21 or to use alternate data source (see building block 2).

  • KYC Requirements. These specify which proof of identity – such as voter card, national ID card, health coverage ID – and proof of address are needed to register for a program. This enabler also describes how to access or spend the mobile money after registration – PIN number, password, biometric data, etc. Some central banks have also opted to reduce KYC requirements for small payments to ease the onboarding of the unbanked and undocumented population (e.g., Colombia and Ghana). The Financial Action Task Force (FATF) provided guidance on digital onboarding and simplified customer due diligence in context of COVID-19, to maintain a high degree of vigilance against fraud while promoting the use of alternate digital KYC mechanisms (FATF, 2020a).

  • User Experience. As illustrated in Figure 10, a successful program adoption requires the population to understand the beneficiary’s journey every step of the way, from registration to use of money. In past G2P program rollouts, some governments have not paid sufficient attention to the user experience—leading to mixed results, including the lack of improvement in financial inclusion (Baur-Yazbeck and others, 2019).

Figure 10:
Figure 10:

Designing the Mobile G2P program around the beneficiaries’ experience is a key success element

Citation: IMF Working Papers 2020, 198; 10.5089/9781513557670.001.A001

Source: Staff

B. Building Block 2: Digital Government22

Many EMDEs are finding ways around missing reliable and broad socioeconomic data— especially in the informal sector—and not shock-responsive Public Finance Management (PFM) systems in the crisis context.13 Countries with more complete socioeconomic information can target households in need of support more precisely. They may also have access to advanced technologies such as digital identification, data analytics, or fraud detection technologies to cope with the sheer volume of public funds being remitted. Even imperfect data and technology can be used to ensure that payments are made in a timely, secure and transparent manner and are adequately controlled and reported. Close collaboration and data sharing mechanisms across public agencies and with private partners such as MNOs can help mitigate the lack of accurate or universal government data on households, especially in the informal sector.

Steps can be taken to ensure inclusion of individuals in need while limiting PFM risks along the following enablers:

  • Social Registry. If no reliable database exists, or data is only available for a narrow share of the population, individuals should be able to apply and provide simple information, ideally through digital platforms. This information can then be used to enroll eligible individuals into support programs. For instance, in Jordan, eligible households to an emergency cash transfer program have been identified through the Takaful program social register. The Takaful platform introduced important enhancements in cash transfer delivery systems including online registration, automatic data verification, improved targeting methodology, beneficiary enrollment sessions to open digital accounts, payments through basic bank accounts or e-wallets, and a robust grievance and redress mechanism. The scope of households eligible for emergency assistance expanded beyond Takaful recipients. The recipients’ online enrollment was increased further during the pandemic, with beneficiaries allowed to open a mobile wallet or connect their bank account for direct cash transfer (G2Px, 2020a). Other types of identification of people in need can complement patchy social registries, e.g., community-based referrals. In Rwanda, for instance, the Ubudehe “grassroots network” was leveraged to identify most impacted households in urban areas and peri-urban areas of Kigali (IMF Staff Report, 2020).

  • Standards and Open Architecture. This refers to the technology supporting the end-to-end framework and the implementation of mobile money platforms involved in the program. In Peru, authorities were able to rapidly transfer money through the country’s BiM (Billetera Móvil) mobile money platform, which is opened to financial institutions, MNOs, and fintech firms. The development of standards (Box 1) helps accelerate the deployment of open mobile money platforms and related digital financial services and fosters compatibility with card payment schemes and other payment systems (GSMA, 2020).

  • Streamlined controls and effective procedures. Existing procedures and controls of some countries’ core PFM systems are not designed to deal with emergencies such as COVID-19 and may introduce complexities and delays incompatible with urgent actions. This enabler explores how countries are modifying or temporarily adjusting existing systems, procedures, and treatment capacities in order to promote a transparent and effective emergency response (Una and others, 2020b).

Emerging Standards and Open Architectures for Mobile Payment

GSMA Mobile Money API

The GSMA and the mobile money industry created a communication standard for key mobile money use cases, including domestic and international remittance, merchant payments, bill payments, and interoperability of mobile money accounts across financial institutions. According to GSMA, this Application Programming Interface (API) enables faster implementation and reduces total cost of ownership in three ways: rapid partner on-boarding, ease of support and maintenance, and raising the capability of the industry as a whole.

The API is designed to be used by any stakeholder in the mobile money industry, which can facilitate integration between mobile money providers, e.g., MMOs, banks, merchants, application developers, and other actors. This standard accelerates countries’ mobile payment projects by offering technology best practices, such as RESTful architectural principles to allow scalability, JSON data format and ISO international standards for better interoperability, and virtualization of payment functions to facilitate implementations and upgrades. The API also provides best practice security recommendations.

Mojaloop

Mojaloop was developed in 2017 by the Gates Foundation in cooperation with fintech developers within the so-called Level One Project (1LP). The goal goal is to make digital financial services more inclusive and more accessible to the world’s poorest population. Mojaloop is a publicly available open-source code for creating digital payment platforms, offering key functions, including (i) a push payment model with same day settlement and notification from payer to payee; (ii) interoperability between all mobile money actors, such as financial institutions and regulated non-traditional financial service providers; (iii) adherence to international standards (e.g. payment data standards ISO 20022); (iv) system-wide fraud and security protection; and (v) proportional identity and KYC implementation based on country’s needs, level of transactions and services provided.

In 2018, Orange and MTN announced a joint venture called Mowali, an implementation of Mojaloop, to enable interoperable payments across Africa. Mowali should facilitate financial flows between mobile money users across service providers and countries and could benefit G2P programs. The partnership should bring together over 100 million mobile money accounts and operations in 22 of sub-Saharan Africa’s 46 markets.

C. Building Block 3: Mobile Money Operators

G2P mobile payments rely on a robust and effective collaboration between the government and MMOs. MMOs are entities allowed to issue electronic money to customers with or without a bank account, via mobile wallets (Box 2). In many countries the service is offered by MNOs, who already have a strong presence for basic voice and data services. When non-banks are sufficiently regulated to provide financial services, as is often the case in Southeast Asia and Africa, they can help accelerate G2P programs. For example, GCash, a Philippine fintech company, was able to rapidly respond to the government’s call to enable mobile transfer of G2P payments, by leveraging their existing platform and network. Wave Money in Myanmar has greatly facilitated G2P mobile payments, while providing additional digital and financial assistance to users. Other non-bank tech companies, like GrabPay in Malaysia, have been central to the success and speed of government cash transfers.

MMOs often provide payment capabilities previously non-existent in EMDEs, including payment networks or payment rails. In Kenya, M-Pesa was born on the back of Safaricom’s telecommunication network to enable a new form of payment. In Nigeria and Uganda, the fintech company Interswitch provides the payment rail for merchants and individuals. Compared to banks, MNOs and fintech firms also tend to have more mature mobile services, higher customer trust, and better user experience. MNOs also often provide broader agent networks compared to banks (GSMA, 2019). These advantages have fueled the success of mobile money in many countries, particularly in Africa (M-Pesa in Kenya, Tigo Cash in Tanzania, or fintech firms Paga in Nigeria and Yoco in South Africa) and Asia (Tencent and Alipay in China). In South Asia, mobile money has recently gained traction with an annual growth of 46 percent, the highest across all regions (Chhabra and Das, 2019).

Some of the key elements to consider when selecting and collaborating with regulated MMOs include:

  • Quality of Service. While many MMOs provide sufficient digital financial services, they may not all qualify for an effective G2P partnership. Governments may clarify the expected level of services, as well as the required risk management and reporting requirements. Tigo, an MNO which provides mobile money services in Paraguay and Tanzania, owes its success to high quality services designed for maximum user adoption (Appendix 1.C). Partnering with fintech firms that develop products with well-designed user experience have led to successful adoption of G2P programs in Southeast Asia.

  • Agent Network Coverage. This includes the availability of agents – typically small, local retail stores – in urban and rural areas and the quality of service they provide. Non-retail stores – basically independent individuals setting up a temporary stand and acting as agents – also play a key role in some markets. Such coverage is essential when online onboarding and remote support are not available, as these agents are the “face” of the service.

  • Mobile Coverage. It is key that the MNOs’ partners have adequate and reliable mobile coverage (at least 2G, and when feasible 3G) across the country, particularly in harder-to-reach rural areas, to avoid excluding large swaths of population in need—i.e., widening the “digital divide” (building block 8). To overcome the lack of adequate coverage in regions where such services would be commercially unviable for private providers, Zambia issued new policies, changing digital payment fees structure to boost MMOs’ coverage of such areas (Baur-Yazbeck, 2019).

  • Mobile Money Regulatory Requirements: MNOs need to ensure that the full equivalent of the outstanding mobile money issued is invested in safe liquid assets such as commercial bank deposits and low-risk government securities through regulated financial institutions via trust or escrow accounts. Most countries have adopted regulatory requirements for MMOs to safeguard consumer funds (GSMA, 2016).

How USSD Mobile Wallets Work

In a majority of EMDEs, mobile services are accessible through a technology called Unstructured Supplementary Service Data (USSD). Created in 1994, USSD provides text-only services, including financial services, that users can access by dialing a short code on their phone. For example, customers from Orange Money in Liberia would dial *144# to check their mobile wallet balance. Like SMS, USSD works on standard phones and smartphones without the need to install any app, and a subscription to mobile data is not required. USSD services are therefore very cost effective and popular, albeit not very user friendly. The application-less service means that a mobile wallet can become available in the entire country, for every customer of the service provider, the moment it is deployed on the network.

The pictures below show how a user would interact with a mobile wallet, before sending mobile money to another person (P2P) or a merchant (P2B):

It is important for regulators to note that USSD infrastructure is typically owned and operated by mobile network operators (MNOs). But mobile wallets can also be offered by third-party mobile money operators (MMOs), which are typically banks. In several countries, MMOs have complained about being barred from accessing USSD by dominant MNOs (CGAP, 2014). In the crisis context, it would be important for policymakers to eliminate this concern in order to accelerate mobile wallet deployment at a low cost.

D. Building Block 4: Financial Institutions

Financial institutions will receive funds directly from the government, and place them in a mobile money account for participants such as MMOs, cash-out agents, and merchants (Figure 7). Countries usually have at least one regulated financial institution with connection to the government’s Treasury.

Governments looking to establish or strengthen their collaboration with participating financial institutions or identify alternative options such as MMO services may consider the following key enablers of building block 4.

  • Branches and ATM Safety. G2P beneficiaries are likely to go to the bank or automatic teller machines (ATM) to exchange their government-issued mobile money against cash even in countries where mobile payments are widely accepted (Kenya, Tanzania).23 During the pandemic, some governments have set social distancing measures that banks have to implement and which makes it harder—and sometimes more dangerous—to cash out G2P mobile payments (e.g., long queue and wait at scarce cash out points). A combined policy of easing mobile payments and multiplying and diversifying certified cash-out agents is therefore key to a safe and inclusive G2P mobile transfer (see building block 5).

  • Ease of Doing Business and Trust. It is important to assess the ability of participating financial institutions to interact with the population effectively. Customer trust, ease of doing business, user support and internet presence are important success factors. Pakistan’s central bank requested that banks open their call centers 24/7 for customer support, in order to reduce physical visits and to assist with basic operations. In Colombia, some banks are looking to use a simplified KYC requirement to provide a mobile wallet to unbanked beneficiaries (G2Px, 2020c).

  • Risks Management. Participating financial institutions are accountable for the integrity, security and privacy of financial and accounting information, as well as fraud prevention such as AML/CFT, and robust Know-Your-Customer (KYC) schemes. This enabler also applies to building block 3 for MMOs. In order to facilitate the on-boarding of new beneficiaries and to foster mobile payments, the Bank of Ghana authorized mobile money users to use their existing KYC-protected accounts to register for the program.24

E. Building Block 5: Cash-out Network

Cash-in / cash-out (CICO) networks play a key role for G2P cash transfer programs to allow beneficiaries to exchange mobile money for physical cash safely. Studies have shown that the majority of beneficiaries withdraw 100 percent of their payment at once (McKee, Kaffenberger, Zimmerman, 2015). In traditional banking (building block 4), CICO locations include direct channels such as banks branches, ATMs, and indirect channels such as retail outlets, supermarkets, and pharmacies.25 These indirect channels are also used by MNOs with a CICO network of their own or managed by a separate agent network.

The following key enablers should be considered when assessing the readiness of a country’s CICO network, in context of G2P programs:

  • Delivery Channel Mix: It is important to aim for diversified and dense delivery channels with reach in remote/rural areas. Traditional channels such as bank branches and ATMs, and governments’ direct channels such as post-offices and local agencies should be complemented by mobile money agents with broad outreach range in EMDEs. Indeed, these networks have on average twenty times more reach than bank branches (GSMA, 2019). Some governments have incentivized participants to operate in regions with low return on investment. For example, Kenya introduced a tiered fees approach to promote better services in underserved regions of the country during the pandemic (McKay and Mdluli, 2020).

  • Liquidity Management. Projecting estimated cash-out volumes, enlisting support of banks and third parties such as agent network managers and preventing crowd formation have been essential during the pandemic. Ecuador doubled the number of cash-out access points during the pandemic crisis, and established payment dates based on beneficiaries’ ID last digits (LLYC, 2020), while Peru used a geolocation system to direct beneficiaries to specific places at a given time (G2Px, 2020b).

  • Trained Personnel. Except for ATM withdrawals, beneficiaries may be interacting with staff who should ideally be trained and knowledgeable about the program, undergo regular audits, and provide adequate customer service. Beyond G2P programs, many EMDEs have introduced initiatives to improve digital and financial literacy. Such resources could be coordinated to include CICO agents.

F. Building Block 6: Payment Acceptance Network

A large merchant network as well as the involvement of other public and private actors could further encourage beneficiaries to opt for mobile payments when possible, thus reducing cash out. Businesses should be involved in the design of the program to limit cash out of G2P payments. Digitization of payment has become a reality in many countries, with more value circulating in the mobile money system than leaving the system for the first time in 2019—setting the stage for a broader acceptance by the population to use and save mobile money (GSMA, 2019). In 2018, to cope with cash shortage, the central bank of Zimbabwe, the main mobile operator Econet Wireless and Mastercard partnered to enable merchants to accept Ecocash mobile money in stores already equipped with card readers. This allowed over 3,800 merchants to be paid easily with mobile money. Such public-private partnership is key to reduce the use of cash.

The following key enablers could facilitate the integration of the recipients of transactions in the mobile G2P framework, setting the stage for longer term benefits from mobile money:

  • Mobile Money Life Cycle. A full digital payment ecosystem must ease the flow of mobile money across government (G), people (P) and businesses (B). In the near term, many countries are typically focusing on G2P and P2B payments. Appendix 1 describes advanced models where P2G, B2G and B2B payment strengthen a comprehensive digital payment economy (see section IV).

  • Fee Structure. A popular measure during the COVID-19 crisis has been the temporary reduction or elimination of mobile money payment fees (both for consumers and merchants).26 For example the mobile industry of Ghana worked with the central bank to implement free mobile service transactions to promote mobile payments. Similar private sectors and central banks collaboration in Kenya (Airtel), Uganda (Airtel, MTN), Rwanda (most banks and MNOs), have facilitated the use of mobile money during the pandemic. Heavier taxation of mobile transactions relative to other financial transactions—e.g., via the banking system—may prove regressive and have unintended consequences (GSMA, 2020c).27

  • Payment Platforms and Interoperability. In many countries, mobile money development has been hindered by interoperability issues between banks, mobile wallets and various payment schemes. Mobile money actors and governments are increasingly collaborating on improving interoperability of mobile payments.28 Prior to the pandemic, the central bank of Philippines implemented the National Retail Payment System (NRPS), a regulatory framework that requires interoperability among payment service providers, not only banks but also non-bank e-money issuers. This greatly facilitated the participation of MMOs to the country’s PESONet and InstaPay automated clearing houses.

G. Building Block 7: Business Model Elements

A mobile G2P program could benefit from industry best practices for digital solutions. The business model of any product covers not only customer experience and solution advantages, but also the distribution channels, marketing strategy, change management, risk management, technology upgrade, and strategic partnerships. When correctly executed with a long-term view, these partnerships can result in a more sustainable and impactful service. The various elements of a robust business model are typically interdependent, and a single “broken link” in the chain (e.g., poor fraud controls, technology downtime, a confusing process to open an account, etc.) can impair an otherwise well-designed product.

Of the many key enablers that define this building block, three are particularly important to ensure sustainable success beyond the short-term objectives of income assistance:

  • Program Features. Setting clear and measurable parameters enables better performance tracking and reduces confusion. Examples of program features include eligibility criteria, the transfer amount, frequency, applicable conditions and the overall duration. Some countries have considered conditioning some features to certain behaviors, e.g., COVID-19 testing, using a portion of the money to make mobile payments, etc.

  • Effective and Frequent Communication. Clear, simple and well publicized communication is critical to the success of any product. Togo prioritized targeting women in its Novissi G2P program and communicated clearly and simply via ads and social media. The effective communication and product management attracted twice as many women as men to the cash transfer scheme.29

  • Program Management. A G2P Program can be managed like any other major complex product. Clear definition of roles and responsibilities across building blocks, reporting processes, continuous improvement, and controlled deadlines and budget are basic expectations for product management.

H. Building Block 8: Digital Inclusion Foundation

The digitalization of payment can leave behind large shares of vulnerable populations (Zimmerman, 2016). Households most impacted by the pandemic are often the hardest to reach with technology physically, economically, culturally (e.g., women have relatively lower access to communication devices),30 or from a literacy standpoint. Close coordination with other government agencies, technology, telecommunication, and fintech companies may help bridge the digital gap that threatens to leave the most vulnerable segments behind (Davidovic and others, 2019). This building block involves different stakeholders and is an essential element of a successful mobile G2P program implementation. This building block can also support other development goals, including several of the UN’s Sustainable Development Goals such as lowering poverty, bridging the gender gap and reducing inequality. Certain regions such as sub-Saharan Africa are more exposed than others to the risk of digital exclusion, despite recent progress (IMF, 2020).

Digital and financial inclusion is a multidimensional and evolving topic that spans beyond the scope of this paper. Still, three key enablers could help policymakers improve the reach of mobile G2P to remote or poor populations:

  • Digital Access and Affordability. To benefit from mobile G2P, individuals need reliable electricity, affordable, sufficient connectivity, and connected devices, such as a computer or a mobile phone. They also need the required knowledge to use the technology, and the financial literacy to maximize the benefits of a digital wallet ownership. Alper and Miktus (2019) proposed an Enhanced Digital Access Index (EDAI) to help measure the ability for the population to access digital services (Appendix 4 and Figure 11). Countries have mandated service providers to reduce electricity and connectivity fees (Malaysia, Panama), strengthen availability and resilience (Vietnam, Chile, Argentina, Qatar), and explored new ways to provide connectivity.31

  • Gender Gap. Over the past seven years, the digital divide between men and women in EMDEs has widened (Figure 12), which is especially challenging when women represent a majority of both the informal sector and of caregiving communities, particularly impacted by COVID-19 (Zimmerman, May, Kellison. 2020). EMDEs should recognize the widening technology gap not only between women and men (ITU, 2019), but also with migrants, internally displaced people or persons with disabilities (UN, 2020), and design accessibility of mobile G2P accordingly.32 In February 2020, as part of its anti-poverty program Ehsaas Kafaalat, Pakistan started to distribute free smartphones and biometrically protected bank accounts to seven million poor women, significantly facilitating access to government money in a secure manner.

Figure 7:
Figure 7:

Progress in digital access in sub-Saharan Africa (measured by EDAI) remains hindered by high costs, and lags in remote areas.

Citation: IMF Working Papers 2020, 198; 10.5089/9781513557670.001.A001

Source: Alper and Miktus (2019).
Figure 8:
Figure 8:

Over the past 7 years, the internet user gender gap has widened in EMDEs

Citation: IMF Working Papers 2020, 198; 10.5089/9781513557670.001.A001

Source: ITU.Note: ITU estimate. The gender gap represents the difference between the internet user penetration rates for males and females relative to rate for males, expressed as a percentage.

III. Limitations and Risks

The potential of G2P for mobile cash transfers is considerable, but challenges and constraints can limit their effectiveness. While the enablers of the mobile G2P framework described in this paper can help tackle key challenges of establishing a mobile G2P payment program under pressure, there are larger constraints and limits that warrant more attention. Some challenges are structural such as the lack of adequate infrastructure (including electricity and connectivity) or insufficient digital literacy, while others are inherent to the introduction of digital technology for the transfer of value such as cyber risks, fraud, and lack of adequate regulation. While structural issue will take time and resources to address, technology related cyber risks, and digital fraud need to be tackled imminently. Policymakers and regulators should ensure that risks are identified, managed and mitigated to the extent possible to build trust in G2P programs. It is important to ensure that the risks of accelerating mobile money, including cyber-risks and digital fraud, do not outweigh the benefits. For instance, since most mobile transfers still rely on at least one bank for their custody or escrow account they could be more sensitive to financial sector shocks if the MNO’s partner bank is affected. Conventional social assistance transfers, on the other hand, could be covered under the deposit insurance scheme if applicable.

Countries may have varying levels of challenges, from infrastructure development to available fiscal space, requiring a different approach and responses. EDMEs with inadequate infrastructure, from electricity to payment rails, have relied on private-public partnerships with MNOs and fintech firms (e.g., Interswitch in Nigeria). Building block 8 also presents the merits of inter-agency collaboration on their digital connectivity initiatives to the timeline of G2P programs. With increased deregulation and liberalization of telecommunication market, countries across the globe have explored public-private partnerships, which have gained popularity across the world and particularly in EDMEs (PPP Knowledge Lab, 2020). While such partnerships are important, effective procurement policies and transparent project documentation should aim to mitigate the risks of working with the private sector such as cost-overruns and corruption.

A. Cyber-Security and Digital Fraud

Given the significant volume of funds and the sensitive nature of beneficiary data, cybersecurity is one of the key risks related to G2P platforms. Cybersecurity risks threaten the confidentiality, integrity, and availability of institutional data, applications, processes and citizens’ information. For government agencies and institutions, the leakage or misuse of beneficiary data or other consumer fraud could have serious reputational consequences and result in a durable loss of trust. Cybersecurity risks threaten various levels of digital systems (software and hardware) and are often exacerbated during crises like the COVID-19 pandemic.

A thorough understanding of cybersecurity and digital fraud risks can help policymakers hold mobile G2P program stakeholders accountable for establishing a robust and secure G2P system. Each of the eight building blocks requires its own governance of cyber and digital fraud risks, from the implementation of standard protection of infrastructure, applications, networks, to strengthening capacity in information security. Sharing knowledge and collaborating through inter-agency IT taskforces have allowed many LIDCs to achieve cyber resilience objectives within a short period of time (Una and others, 2020). Likewise, stakeholders should develop Business Continuity Plans to demonstrate shock-responsiveness and guard against cyberattacks related to remote work (Leonovich, 2020). These plans should identify core business processes and provide alternatives to sustain operations during emergencies.

B. Regulatory Concerns

A regulatory environment fostering G2P service providers’ participation should ensure consumer protection, financial integrity, and financial stability. Many countries may not have adapted their regulatory and policy framework to allow the participation of non-financial service providers in payment systems, to address financial integrity issues or data privacy. As discussed above, the COVID-19 pandemic has prompted policymakers to reduce the regulatory compliance burden on mobile money issued by telecom or fintech firms. Their customers are often not as protected by regulation as those of regulated financial institutions.

Policymakers can protect financial integrity by remaining vigilant to emerging financial crime related to the pandemic, while taking advantage of the flexibility provided into the FATF’s risk-based approach (Financial Action Task Force, 2020a, 2020b). This flexibility is particularly relevant for countries that do not have reliable identity or socio-economic data registries. The authorities should require that service providers ensure their services protect customer data, comply with pertinent AML/CFT standards, and are easy to use. In the long run, policymakers should aspire for international agreements on data privacy, cybersecurity, digital identification, cross-border digital currencies, and regulation (Sahay and others, 2020). Ongoing collaboration among regulators and service providers enables continuous alignment on potential risk assessment and ensure a risk-based AML/CFT approach (AFI, 2020). International collaboration and knowledge exchange such as Interpol’s assistance through ENACT for police in Africa to adopt proactive strategies to combat organized crime threats, facilitate information exchange, and enhance investigative skills are welcome developments (Interpol, 2020).

IV. Possible evolutions of mobile G2P Platforms

The framework introduces key elements at each maturity level of implementation of a mobile G2P payment system aspiring to become sustainable and lay the groundwork for robust social safety net. Figure 8 shows that some ideal scenarios may be accessible to some countries, under certain conditions. While out of scope of this paper, the exploration of possible futures and evolutions of mobile money may better inform current trends for mobile G2P payment.

In the long run, governments could take a broad approach and consider the whole digital government ecosystem. Mobile frameworks put in place or expanded to support households at unprecedented scale could cover additional stakeholders, unlock additional use cases, and diversify access channels through interoperable arrangements if the goal is to promote a cash-lite digital economy in the medium-term. An appropriate digital infrastructure would serve as the backbone of this digital economy, including interoperable retail payment systems, digital identity, and digital data storage hubs (AFI, 2020). This ecosystem has the potential to increase the degree of formalization, improve transparency, and introduce efficiency gains. In a fully integrated digital ecosystem, mobile money disbursed to beneficiaries (G2P) could flow to peers (P2P), other businesses (P2B and G2B) and find its way back to the government in form of taxes (P2G and B2G). Creating more frictionless domestic revenue mobilization, strengthening administrative systems and fostering a formal economy with digital technologies are especially important when debt loads are high and fiscal space is low.

Some countries are exploring central bank digital currency (CBDC) to expedite social assistance in the wake of public health emergencies, such as COVID-19, or natural disasters. Althought out of scope of this paper, it is important to acknowledge the potential impact of retail CBDC on G2P payments in the long-term. One of the motivations for issuing retail CBDC is the development of payment rail for social transfers on behalf of the government. For example, the “Sand Dollar” project in the Bahamas is designed to give residents easier access to financial services and government assistance following natural disasters in light of potential damages to the to the financial infrastructure or limited availablity of cash. The goal is to enable the entire population’s access to digital payments services in order to reduce the size of unrecorded economic activities that take place in the informal sector and to fully include micro, small and medium-sized businesses in the digital space (CBB, 2019). The government expects this CBDC ecosystem to improve tax administration and to increase the efficiency of government spending (CBB, 2019).

Emerging technologies will play a more important role in the future of government social assistance. As illustrated in Appendix 3, current technologies are instrumental for a well-functioning mobile G2P program. As countries advance their level of digitalization and begin integrating emerging technologies into their ecosystem in line with the great-to have state (Appendix 1), government assistance programs have the potential to become more efficient and effective. China is working towards establishing nationwide connectivity and digitizing social security systems using blockchain technology, artificial intelligence, big data and the 5G network (Huillet, 2020). Blockchain-enabled data reporting systems, for example, is expected to improve and accelerate a transparent data exchange across government agencies, enterprises, institutions, grass-roots mass organizations and social organizations, which could improve the availability of data required for more targeted social assistance. Likewise, machine learning could support government in preempting fraud, predicting consumer needs, and reducing waste.

Future digital payment ecosystems are likely to amplify any risks and limitations. With the introduction of new technologies into the payment ecosystem, infrastructure requirements will increase in scope, the management of cyber risks and digital fraud will become more complex and demands on regulators and supervisors will become more sophisticated. New rules will be required to regulate data collection, secure data storage, and validate that machine learning algorithms embedded in the system do not include inappropriate machine learning biases.33 Policymakers should explore how they can use emerging technologies to mitigate new risks such as using AI/ML applications for fraud detection, compliance monitoring or cyber security. Close collaboration among national, regional and international stakeholders will be fundamental to build capacity and knowledge regarding cybersecurity, financial integrity, and identify required resources.

V. Conclusion

As the COVID-19 crisis unfolds, many EMDEs have ramped up mobile money platforms to provide income support at an unprecedented scale. Leveraging the high penetration of mobile phones and mobile accounts relative to banks’ access points, governments have expanded or introduced mobile money transfers to reach millions of workers and households that would have otherwise remained beyond reach, particularly in the informal economy.

Analyzing past country initiatives that built social safety nets around mobile transfers, and recent emergency responses, the paper introduces a comprehensive framework to build sustainable G2P mobile programs. Using stylized facts such as data from existing mobile cash transfer efforts, and insights gained from previous G2P and mobile payment initiatives in EMDEs, the paper deduced the conditions for a successful G2P mobile program and any associated risks in the form of a comprehensive framework. Divided into eight building blocks, this framework describes the required ecosystem to fully exploit the advantages of G2P mobile money transfers. The eight building blocks are designed to guide policymakers and regulators in iteratively adapting their country’s regulatory framework, scale up their infrastructure or choosing the right collaboration partners in support of G2P mobile transfers.

In the longer run, the framework can help policymakers develop stronger social protection systems and contribute to their strategic development goals. Together with other programs, mobile transfer platforms can be at the core of stronger social safety nets, allowing for adequate and effective coverage of vulnerable households and workers. Beyond safety nets, G2P mobile transfers can further contribute to inclusive growth by bringing financial accounts to the unbanked, empowering women financially, and helping small and medium enterprises grow within the formal sector. It can also help increase the transparency and efficiency of public resource management.

Regardless of the country maturity level, any G2P solution will introduce risks and reveal constraints that need to be mitigated and managed. Risks will become even more prominent as digitalization progresses and countries introduce more sophisticated technologies into the digital cash ecosystem. Governments should remain cognizant of potential new risks that present themselves as they mature their mobile cash transfer programs. Some risks such as cyber security require immediate attention while others such as regulation to protect data privacy or mitigate fraud and the violation of financial integrity standards call for a concerted governments effort over the medium-term.

Glossary

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Beyond the COVID-19 Crisis: A Framework for Sustainable Government-To-Person Mobile Money Transfers
Author: Delphine Prady, Herve Tourpe, Sonja Davidovic, and Soheib Nunhuck
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    Existing, Additional and Total Population Coverage of Monetary Transfers During COVID-19

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    Population in need of support after a COVID-type shock

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    Coverage of Social Assistance Programs and Share of Informal Economy, by Income Group and Region

    (percent)

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    Basic Trinity of Population Reachability

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    Coverage of Financial Account, Mobile Phone Ownership and Mobile Money Account, by Region – 2019

    (percent and million)

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    Eight “building blocks” for a sustainable Mobile G2P Framework

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    How G2P mobile cash typically flows from government to the unbanked and other participants

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    Each of the eight building blocks relies on key “enablers” that support various degrees of mobile ecosystem’s maturity.

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    The framework maturity table (Appendix I) helps stakeholders to identify their current situation, as well as possible evolution strategies.

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    Designing the Mobile G2P program around the beneficiaries’ experience is a key success element

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    Progress in digital access in sub-Saharan Africa (measured by EDAI) remains hindered by high costs, and lags in remote areas.

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    Over the past 7 years, the internet user gender gap has widened in EMDEs