Building a national payment system is a huge undertaking.
Prior to launch, banks and non-banks have to collaborate on the governance, rules and features of the system. They have to build coverage across open and instant rails. This takes thorough planning, clear communication and strong supporting processes and branding.
Launching a national payment system is an achievement not to be underestimated. Yet the technology and the platform is not the be-all and end-all. It is merely a means to an end.
The real value comes when the system is used to unlock benefits, such as delivering on social projects and financial inclusion.
Build out use cases
Social projects aim to benefit particular individuals, communities or societies as a whole. This includes helping citizens with child benefit, student loans, vouchers for discounted medicine, employer-provided luncheon vouchers and many more.
Governments, central banks and banking associations have a significant part to play in the success of social projects and financial inclusion at a national level. Consider the various government disbursement programmes mentioned above, but also government as a recipient of funds from both citizens and businesses.
Developed correctly, digital payments to and from government make commercial sense. They help break the dependency on cash and other less efficient payments methods. They prevent leakage of funds to the nominated recipient. They also drive volume through the system. This helps build critical mass for national payment systems and strengthens the network effect for service providers, end users and government.
Build out usability
Usability is another key feature of social or government programmes. Let’s take the 3+ card programme in Latvia as an example. This gives discounts for parents with three or more children. However, trying to obtain a discount for a train trip home recently was quite a cumbersome process.
I had to show my 3+ card and ID card in the ticket office when buying the ticket. On the train, I had to show my ticket, 3+ card and ID card. If I had been travelling with my children, they would have had to show their ID cards, too.
And this poor experience is only the part concerning the end user experience. I believe there is also quite a complex process behind this programme to allow merchants to get compensated from the government for the discounts they provide. It’s a great social programme for larger families but the delivery is clunky and sub-optimal.
It should be used to bring a sense that the government cares about families. Unfortunately, in this instance, it brings disappointment and a feeling that the government has created such a complex process for all the parties involved, that many actually avoid using the programme.
Integration of social programmes and other government services, such as national ID services, within a national payment infrastructure could create the easy execution of a social program for all involved parties – government, merchants and society overall.
Products have to be easy-to-use to gain take-up and displace less efficient, non-digital alternatives. This is where knowledge of the market, the target audience and existing products is so critical. What is easy-to-use and represents a credible alternative will depend country to country.
How Tieto can help
National payment system projects cannot be accomplished alone. Collaboration across and between stakeholders and industries is essential. So is selecting the right long-term partners to develop or re-shape a national payment system pre- and post-launch.
Tieto has worked with central and retail banks, banking associations and service providers in several countries on payment systems to drive social and government programmes and financial inclusion. For client references or to find out more, please contact me Edgars Bremze, senior offering manager, Tieto.