Citizens and States: How Can Digital ID and Payments Improve State Capacity and Effectiveness?

Categories : Digital identity, Technology and Operational Enablers


Author: Sarah Corley

In Bangladesh, a mother can now receive her child’s education scholarship through her mobile phone account instead of having to stand in long lines at the school on a prearranged day for a cash handout. Not only does this save her time and effort and provide accurate and documented payment, it also relieves school officials of a burdensome administrative process and of the risk that—rightly or wrongly—they can be accused of corrupt handling of funds. In Kenya, a farmer can invest his or her savings directly in a small slice of a government bond through a mobile phone. He can become eligible for a small loan on the basis of a stable record of receipts and payments on his mobile account without posting collateral. In Andhra Pradesh, a state in India with 50 million people, the authorities can drill down through statewide reporting data, in real time and across thousands of delivery points, to monitor the provision of rations to poor beneficiaries. They can detect transaction failures almost immediately and require rapid follow-up and remediation.

Digital technology, notably in the areas of identification (ID), mobile communications, and financial payments, is impacting societies and economies in many ways. It is changing the way that citizens (in the sense of individuals) and states can interact and transact business with each other across a wide range of programs and services. This offers new levers to states to implement a wide range of policies and programs, to increase effectiveness and accountability, and also to include many who have been effectively shut out—whether through lack of recognition, high transactions costs, or the inability to ensure that payments or other services are delivered accurately, to the right person, and at the right time.

The report considers the potential for digital technology that enables three things—the precise identification of all parties to an interaction; low-cost communications; and accurate, accountable, and convenient payment processes—to help reform citizen–state interactions, and to do this in a way that increases individual agency and improves efficiency in the delivery of public services, subsidies, and transfers.