Digital Cash Transfers for COVID-19 Relief: Emerging Lessons
USAID’s Bureau for Policy, Planning and Learning’s Tanvi Jaluka reflects on how social programs have quickly transitioned to digital transfers, and what comes next.
Since March, in response to COVID-19, nearly 200 countries have introduced or expanded social protection programs. Many of these programs are now relying on some form of electronic cash transfers, which have enabled governments to distribute benefits at a greater scale and with unprecedented speed and efficiency. And yet, significant challenges remain.
Difficulties in getting transfers to everyone, especially to the world’s neediest, will continue to challenge the reach of electronic transfers. Many of the world’s neediest are disproportionately unbanked and unconnected. Global gaps in internet access, financial exclusion, and mobile phone ownership continue to be impediments to moving electronic transfers to last mile recipients (see examples from South Africa, Bangladesh, and Namibia). Fortunately, lessons for overcoming these challenges are also emerging:
The State of Electronic Transfers
Electronic transfers as a method to provide COVID-19 assistance funds have enabled governments to move money rapidly, efficiently, and safely to reduce person-to-person contact. In many respects, this expansion of cash transfers this year has accelerated a trend, which has been ongoing for over a decade. Before the pandemic, some 18 percent of the world’s population was receiving some form of direct-to-account government transfers. COVID-19 relief transfers, moreover, have reached some 14 percent of the world’s population — or 1.1 billion people.
There are several ways in which governments are using digital technology to provide COVID-19 relief transfers. Online and SMS-based messaging are spreading awareness of new programs and helping to clarify how and, if needed, where to receive transfer payments. Digital platforms are helping beneficiaries self-identify and enroll into programs, whereas in other cases, governments are using pre-existing digital social assistance databases to identify and contact target households. Governments are also sending transfers directly to mobile wallets. Across Africa, where mobile wallets are more widely used than traditional bank accounts, governments are arranging direct to mobile wallet transfers, casting the safety net far beyond its traditional reach. Elsewhere, from Costa Rica, India to Thailand, direct-to-bank deposits continue to offer an easy pathway for distributing cash transfers.
Casting a Broader Net
The expansion of digital cash transfers during the current COVID-19 crisis has shed new light on the need for furthering the reach of digital transfers. Here are several lessons:
Narrow the digital and financial divides.
Access to digital technology remains a challenge for many of the world’s neediest. Some 4 billion people continue to lack or face limited access to the internet as digital access and literacy also continues to lag in many rural areas. Women continue to lag in phone ownership and digital literacy. Women are also more likely to lack access to bank accounts. Widening the reach of electronic transfers will require extending low cost access to digital and financial services to new communities and demographics. In the short term, governments and policies will need to balance digital transfers with physical transfers, with the latter specifically targeted toward the most marginalized.
Ease enrollment.
Access to public services can become a cumbersome process involving multiple hoops and documents. Verification, for example, may require multiple forms of ID, an obstacle that may be particularly difficult, or even insurmountable, for the poor and marginalized. In some cases, governments have sought to overcome these obstacles by piloting tiered approaches to benefit enrollment. In tiered approaches, an initial, easy enrollment is used to introduce beneficiaries into the system. Validation and verification then follow at a later stage.
Leverage private networks.
Telecommunications infrastructure has rapidly improved and expanded connectivity in many developing countries. To move payments, especially to last mile beneficiaries, many governments in developing countries have increasingly turned to private telecommunications companies. Private or third party verification and cyber-security tools may also help to increase efficiency and reduce potential fraud.
Test, track and experiment.
Digital transfers are well suited for experimentation and analysis. As a relatively new field, governments should seek to leverage the scale and traceability of cash transfer programs to assess program reach, impacts, and efficiency. There is a long history of merging experimental design tools with digital cash transfers. As governments create or expand new digital transfer programs, they may wish to incorporate experimental programs to improve, innovate, and refine targeting and delivery systems.
Extending digital services to the world’s poorest and most marginalized continues to be a central piece of USAID’s Digital Strategy and the Journey to Self Reliance. In the pandemic environment, reaching these communities is both more important and more difficult than ever. The lessons we are rapidly learning will transform the future of social assistance programs, and could help build more stable, self-reliant and sustainable public institutions. Post-pandemic, we will be better positioned to ensure that transfers are not only reaching their intended targets, but that they are delivered transparently, efficiently, and when they are needed most.
To learn more, read USAID’s complementary paper on digital payments and watch the Better than Cash Alliance’s webinar on the Colombia case.
