How digitised aid distribution helps the vulnerable and boosts economic recovery
As the fallout from the COVID-19 pandemic continues, the need for government disbursement programmes which enable quick and efficient distribution of financial support to people in need has rocketed.
The crisis hit hard and fast, giving little time to set up systems to support vulnerable people who need urgent help for essentials including food and medication – in some countries numbering in the millions. And while governments have set aside record sums to do this, getting timely help to the people that need it, whether they are unbanked Guatemalan families or struggling French patisseries, is easier said than done.
One solution is to take advantage of the benefits of digital payments. They both enable governments to reach individuals without bank accounts and encourage people to spend locally, as well as helping stimulate economic recovery. And along the way, the digital distribution of aid also provides governments with efficiencies, security and control.
A selection of some examples of the great partnerships around the world
Helping to drive the economic recovery in France: Caisse d’Epargne and Natixis Payments (BPCE Group)
Among the impacts of coronavirus on the Somme were a flagging local economy and healthcare workers who were in need of a boost in morale. To solve these two challenges at once, the regional administration decided to issue pre-paid cards to healthcare and social workers. The department distributed 13,000 cards, each loaded with €80, to be used only in local shops, restaurants and cultural attractions.
Caisse d’Epargne Hauts de France, the Somme Departmental Council’s banking partner, approached Natixis Payments, its payment partner (part of Groupe BPCE), to design a tailored pre-paid program.
A spokesperson for Natixis Payments, said: "It was very important for the regional administration that the card would help the local economy. We know that SMEs are suffering from the COVID crisis, and especially the culture and leisure industries. The answer was to develop a solution based on retailers' Merchant Category Codes. The cards only work in payment terminals where the codes correspond to the types of business the Département wants to support. This initiative has really had a profound impact on the area, both economically and socially.”
Providing access to products and services in Spain: CaixaBank & MoneyToPay
When lockdown hit Spain, thousands of people on low incomes were suddenly cut off from the social canteens and pharmacies they regularly relied on, for food and medicines.
With no time to lose, local councils in Spain along with CaixaBank’s electronic money entity (MoneyToPay) realised that the simplest way to make sure people retained access to basic supplies, was to issue pre-paid cards that could be used in local supermarkets and pharmacies.
An initial run was distributed through CaixaBank, Spain’s largest retail bank – but it was clear that this would not be enough.
"Given the tight deadlines, we realised we wouldn’t have any cards left after the second week of the programme, which would have meant leaving families without the funds they desperately needed,” said a spokesperson for CaixaBank’s Corporate & Institutional Banking Division. "Although we were in the very early stages of lockdown, we received approval for the programme from the bank’s regulatory structures."
The cards were available to local institutions within a record time of five days after the agreements were signed. MoneyToPay issued more than 300,000 cards – a number expected to rise as regional and local authorities across Spain continue to request additional cards.
Reaching those in need in a record time in Guatemala
Further afield, the Guatemalan government, like many other nations, responded to the COVID-19 pandemic by offering support to low-income families. Selected on the basis of having low electricity consumption, more than two million families across the country were eligible, and each received a monthly payment of Q1,000 ($130) for the purchase of essential goods.
One of the challenges was the large portion of beneficiaries who were unbanked. It was also particularly important to the government to make sure that the process was both transparent and secure. And so they turned to a digital disbursement solution.
The initiative involves the national government, system integrator VisaNet Guatemala (local acquirer), electricity and telecom companies and local banks. It allows beneficiaries to purchase goods from authorised merchants – supermarkets, pharmacies, convenience stores and gas stations – by presenting their ID and an electricity bill, along with a code sent by the Ministry of Social Development via text message. The code is generated by VisaNet Guatemala, based on a government database of eligible recipients, and then cross-checked at the point of purchase to make sure that it matches the user ID.
The COVID-19 crisis has demonstrated the real benefits of digital disbursements, during a time of dire need,” said Mark Nelsen, Head of Product at Visa in Europe. “Essentially they are a replacement for sending out paper-based cash, cheques or vouchers, which is historically what a lot of governments used to do in an emergency. "Digital disbursements are an electronic version of that money and which most of us are using anyway these days. So, it's just a much more convenient, efficient and safe way to get aid to people.
The critical role of issuing banks and pre-paid partners
Reducing physical interaction is one of the many advantages of distributing payments digitally that became visible during the crisis. Other benefits include:
- Contributing to economic recovery: As well as helping the recipients themselves, disbursements can provide a boost to local businesses. In the Somme, a department in France, for example, pre-paid cards are being given as a thank-you to medical staff (see below). To help small businesses survive, the cards are designed specifically for use in local outlets, as defined by their Merchant Category Code (MCC).
- Reaching people in need: Pre-paid cards can help ensure that potential beneficiaries don't get left behind. Not all recipients will have a bank account, or be confident enough to create an account online.
- Providing operational efficiencies: Governments benefit from less reliance on paper-based methods which can significantly reduce operational costs. Digital disbursements can be made immediately, and governments can have confidence that the right people receive the funds quickly.
- Combating fraud & identity theft: Thanks to sophisticated identity verification systems, digital disbursements ensure that only those who are eligible receive the aid with the reduced likelihood of fraud.
The critical role of issuing banks and pre-paid partners
In response to COVID-19, it's been necessary to set up disbursement programmes at lightning speed, meaning that issuing banks looking to partner with governments need to be prepared.
“Issuers and other players, including program managers and issuer processors, play a vital role in supporting pre-paid programs and disbursements,” said Nilufer Wadge, Regional Head of Consumer Solutions. “A government needs a partner to be able to issue cards, physical or digital, and disburse funds. The key to a successful pre-paid card program is the technology platform, fast deployment of physical cards, instant digital issuance, program design and configuration, and robust reporting to name a few.
“There is a lot of opportunity for pre-paid players to get involved as governments evolve policies and look at ways to rejuvenate the economy. We all have our part to play and we have seen banks around the world step up to the challenge.”
Visit Visa’s Partner Portal for more information about how to get involved with a digital aid disbursements programme.
Visa partnered with issuers, local and central governments on each of the above case studies.
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