Experimenting with Smart money
Many of Kela’s processes still consume a lot of time handling paper forms — from customers and employees alike. Every year hundreds of thousands of letters are sent back and forth concerning Kela’s payment guarantees. We are currently looking at how “Smart money” might eliminate all of the paperwork from payment guarantees, and experiments are being prepared for later this year.
Smart money — what is it?
Smart money is a conditional digital payment guarantee that relies on distributed ledger technology to determine who may use the payment guarantee, what products and services can be bought with it, and where. The basic idea is that Smart money knows how it can be used: for what, where, when and by whom.
Why Smart money as a solution?
Smart money has the potential to significantly reduce the administrative burden of all parties involved in Kela’s payment processes. Unlike paper-based payment guarantees, Smart money tokens can be granted (and controlled) digitally and they significantly reduce the risk of fraud. The user experience is similar to existing digital payment methods and it can be tailored to the conditions of the spending context. The reimbursement process can be fully automated and payments can be executed in real time.
There are several applications of Smart money within Kela’s context (read more about them in this story). The true potential of Smart money lies in its ability to work as a solution outside social security benefits and reimbursements as well: in personal budgeting, insurance payouts, vouchers for culture, exercise, public transport and lunch benefits.
Smart Money — how it works:
Background for the experiment
When we at KelaLab started talking about Smart money with our partners and stakeholders last summer, we became aware of a few public sector initiatives around the world testing or piloting similar solutions.
The UN has been innovating how refugees might access and spend their financial assistance, securely and efficiently:
More close to home is an experiment done by the Commonwealth Bank in Australia within the National Disability Insurance Scheme (NDIS):
In September 2019, European Innovation Council received 176 applications in their search for blockchain solutions exploring the area of social innovation, and recently awarded the six winners:
Part of our innovation program at Kela is to investigate how emerging technologies might help us take leaps in digitalization and improve customer experience. Smart money seems to have the potential to do just that. Our primary method of investigation is learning by doing, so last autumn we decided to do a proof of concept.
Proof of Concept — validating the solution
The Proof of Concept (PoC) project was carried out during the last three months of 2019. Together with TietoEvry and advisors from Tax Administration, the Financial Supervisory Authority, and Borenius Attorneys we set out to demonstrate the capabilities of the solution concept for Smart money. The solution was validated from three perspectives: business, legal and technology (Corda).
During the PoC project Smart Money was not tested among customers. However, we did conduct user interviews to understand the current situation of psychotherapists and customers and to evaluate the viability of the smart money solution in the context of rehabilitative psychotherapy.
Case rehabilitative psychotherapy
Kela provides access to rehabilitative psychotherapy for one year at a time and a customer can receive psychotherapy via Kela for up to three years. Financial support for psychotherapy is available for up to 80 sessions per year and for up to 200 sessions in total.
The maximum reimbursement from Kela is a fixed amount and it is often smaller than the fee charged by the therapist, so the customer pays the outstanding amount not covered by Kela. Either the customer or the therapist can claim for reimbursements after the therapist’s session. The claims are processed manually at Kela and reimbursements are paid to bank accounts within three to four weeks. Based on the therapist’s claim, Kela sends a summary of the sessions held to the customer by letter each month.
In 2019, Kela provided access to rehabilitative psychotherapy to 55,000 customers. The number of customers has increased steadily since 2011, which was the first year when psychotherapy reimbursements were made by Kela. There are currently around 5000 approved psychotherapists registered at Kela.
In most cases the customer and the therapist agree that Kela’s reimbursement is claimed by the therapist. This is done by filling in and mailing two paper forms that indicate expenses, dates of the visits and number of visits from all customers reimbursed by Kela. In either case, the money is paid within five to eight weeks once the claim is received. The therapists (and customers as well) would greatly appreciate an easier and faster reimbursement process. For many of them a major proportion of their income comes from Kela compensation.
Summing up the Proof of Concept
We found that Smart money would deliver real benefits in the reimbursement process to psychotherapists, Kela and the customers: it would eliminate all of the paperwork related to reimbursements. The Kela compensation could be paid to bank accounts in near real-time, but this would also mean a significant increase in transaction costs for both Kela (bank fees) and the therapists (bank and accounting fees). But even cutting the waiting time down to a couple of weeks (as opposed to eight) is a big improvement.
We also anticipate that Smart money would significantly improve the transparency of payments as well as provide customers with better visibility to the allowances they have used and to their remaining entitlements. Through the use of Smart money, Kela could get reliable information of therapy sessions held with customers, in near real time.
We summarized our learnings and presented them along with a vision and plans for the future in a recent webinar. You can watch it from Kela’s YouTube channel (in Finnish) or take a look at the presentation slides here (in Finnish). The report from the PoC is available in English here.
Discovery phase — preparing for Smart Money experiments
The successful proof of concept encouraged us to move forward. We decided to do more research and validate the solution with users. One of our first discoveries was that the therapists would prefer to request payments in batches rather than after each individual session, as we had first presumed.
And since then, we have been testing and iterating the prototype of the solution further. We have also talked to some of the larger healthcare and psychotherapy service providers to understand how payments are handled and how the whole payment guarantee process works in their context.
We have discovered that digital solutions such as Minduu and Diarium, made specifically for therapists, are typically used to take care of patient records and billing, and eventually to redeem payments from Kela. To continue our discovery and to see whether they would be interested in co-designing and co-experimenting the solution with us, we met (online, of course) with these software providers. We talked about the Smart money solution, and how they see it meeting user needs and integrating with their software.
The service providers, the software providers and we at Kela all have a mutual interest to offer our customers and service users an effortless user experience and to make the payment guarantee process as simple and as efficient as possible. We see that Smart money has the potential to make this happen, but first we need to learn more through experiments, together.
The experiment — the why, what and the who
Despite the potential of the Smart money there are still many questions to be answered. The challenge is to accelerate our learning on this novel solution, learning both from the technology itself and the user needs that are involved in the process of payment guarantees. During the autumn we intend to do experiments that hopefully provide us with enough answers to move further towards a pilot.
From the users’ perspective our goal is to:
- Understand and validate the user needs of different stakeholders involved in the Smart money network
- Develop and validate the service concepts for different user groups and user roles
From the technology perspective our goal is to:
- Understand the technical and functional requirements of different stakeholders
- Understand the technical limitations and possible solution models
- Define the technical and functional prerequisites of joining the Smart money network.
In addition, we continue to carve out the legal and regulatory requirements for the Smart money network.
Our aim is to co-create and co-experiment with partners from healthcare, psychotherapists and software providers.
What happens next
We will meet with our partners and stakeholders after the summer holidays to talk about how we could carry out the experiments together — what it takes and what are the goals and benefits for each organization involved.
Our KelaLab team is getting the tech capabilities ready during August and September so that we could do the first iteration of experiments in October. In practice this would mean user tests and simulations in real context. The second iteration of experiments is planned for November. This involves testing the whole cycle of the smart money — in a sandbox environment of course.
So, that’s the rough plan at the moment. Once we start learning from the first experiments we can start formulating the actual plan for Smart money development. By December we can sum up all our learnings and propose decisions on next steps in Kela.
Stay tuned! We will update our progress here in Medium and most likely organize open webinars and other stakeholder events.
