Identity in digital payment schemes: city, state, nation or – for India – the globe
Digital identity and broader digital ecosystems and government stacks are emerging to serve various functions at the local and national level. The COVID-19 pandemic proved an accelerator as governments sought ways to transfer cash to those in need while hoping to keep fraud to a minimum. India’s national ‘gov stack’ is set to receive continued international attention as the country presents it during its G20 presidency.
In all cases, citizens may be unaware of private sector access to their data. Mastercard is working to deliver schemes with the public sector in 60 countries.
India sets out global stall for Aadhaar model
The G20 is going to examine India’s digital-identity-based technological and financial ecosystem as a successful alternative to Western or fintech approaches, as the Development Working Group (DWG) meets for the first time during India’s first presidency of the group of the world’s 20 largest economies.
India’s sherpa to the G20, Amitabh Kant, says the country will use the presidency to forge win-win collaborations between developing and advanced economies, reports Business Standard, as the DWG meets for the first time, hosted by India which took up the 2023 G20 presidency on 1 December.
India’s growth model has achieved the equivalent of 50 years’ growth in just ten, says Kant, who differentiates it from fintech and European models. India’s financial ecosystem is pinned to its biometric, digital national ID, Aadhaar and the Unified Payments Interface (UPI) for real-time transfers based on mobile numbers.
While areas such as financial inclusion and welfare transfer legally cannot depend on a person being enrolled, the realities show than millions are excluded by the Indian system.
Kant hopes for discussion on restructuring multilateral institutions such as the IMF and World Bank in the first instance, and others such as WTO and WHO. He said that while they provide direct funding to nations, they do not provide blended finance or credit enhancement.
The outcome of the discussion could be notable as the IMF are keen proponents of India’s digital ecosystem. At the recent Annual Meetings of the IMF and World Bank Group, IMF Director Kristalina Georgieva praised digital access in India, calling it a “bright spot” for continued recent growth: “this growth is underpinned by structural reforms, among them the remarkable success in digitalization in India from digital ID to providing all services and support on the basis of digital access.”
The IMF seems keen to promote digital ID for enabling the next financial era of Central Bank Digital Currency (CBDC). The agency recently released a report on digital currencies in Africa.
Indian Prime Minister Narendra Modi pre-empted the meeting in a speech at the G20 events in Bali: “Can we take a pledge together that in the next ten years, we will bring digital transformation in the life of every human being, so that no person in the world will be deprived of the benefits of digital technology.”
In August 2021, under the Italian presidency, the G20 digital ministers made inclusive digital identity one of their twelve actions for achieving growth and meeting the UN Sustainable Development Goals (the “Data for Development: Role of G20 in advancing the 2030 Agenda” side event in Mumbai will explore this further). The declaration even included a mechanism for sharing digital identity practices and stated that welfare should not be available solely through digital ID.
Although even at this point, India’s Minister of Electronics & Information Technology, Ashwini Vaishnaw said, “Providing digital identity Aadhaar to 1.29 billion users, opening bank accounts of 430 million poor people and linking both these to send the financial entitlements directly into bank accounts has eliminated leakages from delivery system.”
The architect of Aadhaar, Nandan Nilekani, recently spoke about the relationship between Aadhaar and the UPI, the backbone of financial transactions, stating that data empowerment is being built into the system.
Mastercard, Minnesota and mega-apps: lines blur as user data is amassed
“Digital payments also present an opportunity in the footprint they leave behind,” said Jennifer Duncan, vice president, government innovation, at Mastercard during a webinar on digitizing government payments hosted by her firm with support from the Global Government Forum.
“More transactions pass through our network each day than there are searches on Google,” she added.
“Not only do these transactions enable the digital economy, they generate anonymized and aggregated data, which form actionable insights. Many governments working with us have been using these insights to understand what’s happening on the ground.”
Private sector know-how was important for multiple aspects of U.S. state Minnesota’s COVID-19 payment boost explained Tyrone Spratt, chief business technology officer, agriculture, at the state’s Board of Animal Health and Labor Industry.
The US$500 million scheme made payments to those who worked on the frontline, in roles as diverse as emergency response and meat packing and, according to Spratt, formed “a thank you in recognition of those frontline workers who put their lives on the line to ensure that the state continued to function.”
The system was devised in 35 days and received 1.2 million applications of which it approved just over a million, dividing the budget equally, reported the Southern Minn. The team had to identify who was eligible and also who was not: “This was our first take of working across multiple state agencies [to determine] what does fraud look like and how do we prevent it,” said Spratt.
Payments were made either to a bank account or as prepaid value on a ReliaCard, a U.S. government scheme with prepayment cards from Mastercard and Visa.
Cooperation was needed between government and private sector, noted Spratt: “those vendor partners in essence become an extension of Minnesota state government.”
Turkey’s metropolis launched the Istanbul Senin super-app, which now has around 1.5 million users or ten percent of the city’s population, to improve public access to services as well.
“We wanted to launch a programme where people could log in with two factor authentication – as secure as a bank with a secure ID,” said Hakan Kaplan, Istanbul Senin project coordinator, “and we wanted it to make lives of the citizens of Istanbul easy.
The app permits social functions and community building, even allowing users to pay the bills of others to help them when in need. Future functions will allow local firms to list in a marketplace so that citizens can shop locally.
digital economy | digital ID | fraud prevention | India | India Stack | Mastercard | payments | social security | Unified Payments Interface - UPI